Is a Website a Fixed Asset or Expense?

Websites are an advantage, so it's important to draw up your company's balance sheet. Most people consider the development of a website to be an expense for the business. Websites that provide general information about a company are not classified as fixed assets, as they don't directly contribute to generating income. Instead, they are used as a form of marketing.

The cost of hardware needed to operate a website is within standard rules for depreciable equipment, and similar rules apply to purchased commercial software. The creation of a completely new website, or the creation of significant new functionality for that website, will be included in capital expenditures. Typically, the cost incurred in creating, designing, developing, and programming a website will be treated as a capital asset. This is also the time when the company can purchase all the hardware needed to support the website. These purchases will follow existing capitalization policies, and will be included in the balance sheet and amortized.

In your accounts, the balance sheet asset will need to depreciate over the lifetime of the website. A website can be one of the most valuable assets your company owns. A website designed and developed with your target market in mind and with content that attracts, engages and delights your customers is an invaluable asset and a powerful tool in the right hands. Whereas an accounting firm's website with details about the company and its services would not be a fixed asset. Once your website launches, the ongoing costs of hosting, maintenance, and product upgrades cannot be capitalized as a fixed asset. However, if you have confirmed that your website is a fixed asset, you can include all the costs of launching the website to determine the cost of the website to be treated as a fixed asset. A well-built, search engine friendly, properly marketed, and high-ranking website can not only increase the sales of your business but also increase its value; sometimes more than any other business asset.

Treating your website as a fixed asset means that its cost is capitalized on the balance sheet and amortized over several years. As a CEO or business owner, it's easy to see why a building, equipment used, and its brand name and logo are assets to your business; but a properly optimized business website is now just as important for your business growth. Your website is a non-monetary asset with no physical substance but it is still identifiable and separable.

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