Journal Entry For License Fees

The fees paid to start a new business or fees paid to get copyright rights for a product, service, content, etc. A License Fees (LF) is an Expense if it is paid within one year accounting period, otherwise it would be considered as an Intangible Asset and recognized on Balance Sheet. Examples include annual business fee paid to operate the business in the specific region of a country, a proprietor paid an amount of money to local government to open or operate the Mobile Phones Business in local region of the country, etc.

The journal entry to record license fees is shown below:

                                               License Fees a/c  XXX

                                                                           Cash a/c / Bank a/c  XXX

                                                             (LF Paid for the Period)

License Fees Expense is a Temporary Account which is shown in Income Statement at the end of the accounting period.

If the LF is accrued i.e., license is obtained but not paid in cash at the end of the accounting period, so it is accrued for the period. In such a situation, Accrued License Fees or Outstanding License Fees or License Fees Payable account is created according to Accrual Basis of Accounting.

Accrued License Fees Journal Entry

The adjusting entry for license fees accrued is shown below:

                                         License Expense a/c  XXX

                                                                          Accrued License Fees a/c  XXX

                                                         (License Fees Payable for the period)

The above entry will be reversed if license fees expense paid in cash / bank.ads1

Accrued License Fees Account is a Current Liability and shown on Liabilities & Equity side of balance sheet.