The proper accounting for the costs incurred in creating computer software products that are to be sold, leased, or otherwise marketed to external parties, is to
A) capitalize all costs until the software is sold to external parties.
B) charge research and development expense when incurred until technological feasibility has been established for the product.
C) charge research and development expense only if the computer software has alternative future uses.
D) capitalize all costs as incurred until a detailed program design or working model is created.

Question

Quizplus · Accepted Answer

According to Generally Accepted Accounting Principles (GAAP), costs incurred in creating computer software products that are to be sold, leased, or otherwise marketed to external parties should be charged to research and development expense when incurred until technological feasibility has been established for the product. Once technological feasibility has been established, development costs in the subsequent phases should be capitalized and recognized as an asset until the software is ready for release. Therefore, option B is the correct answer.

The Proper Accounting for the Costs Incurred in Creating Computer