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The correct account for historical stock market data.

I purchased $200 worth of stock market data from the Chicago Board Options Exchange two weeks before the start up of my LLC (a stock trading company). The data is several million rows of excel data and could be considered a database even though it does not posess a name like DB2, MySQL or Oracle. The data will be used for back testing different stock market trading strategies. My question is: What account do I put the $200 under? Is it Computer Software? It is not really software. It is data. Business Expense? Startup Expense? Professional fees? Fixed Asset? It is as"fixed" as the computer is, I will always have it, and it is actually resellable even though a buyer would be hard to find.

 

What would be the appropriate account for $200 worth (several million rows) of excel data?

 

Thank you for your help,

 

Steve

Best answer 02-16-2019 10:33 AM

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Re: The correct account for historical stock market data.

Regardless of how you might classify this type of 'asset' - there is also a value consideration, and $200 would be probably be too small to capitalize for anything. So it would be expensed.  It is not going into sales direcly so its not a COG item, therefore it goes into 'expenses' and exactly where is your call.

Now if was $200,000 then you probably would be capitalizing it.  US companies typically like to classify assets exactly according to the tax rules which you can research or ask about further  - thats not my area.  For companies with less prescriptive requirements I would suggest that this is an 'intangible asset' not a fixed asset.

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Established Community Backer ***

Re: The correct account for historical stock market data.

Regardless of how you might classify this type of 'asset' - there is also a value consideration, and $200 would be probably be too small to capitalize for anything. So it would be expensed.  It is not going into sales direcly so its not a COG item, therefore it goes into 'expenses' and exactly where is your call.

Now if was $200,000 then you probably would be capitalizing it.  US companies typically like to classify assets exactly according to the tax rules which you can research or ask about further  - thats not my area.  For companies with less prescriptive requirements I would suggest that this is an 'intangible asset' not a fixed asset.

Community Contributor *

Re: The correct account for historical stock market data.

Thank Mike, you answered my question. I expensed it as a startup cost.

Established Community Backer ***

Re: The correct account for historical stock market data.

Let's understand Asset = something I invested significant funds into and it will last a significant amount of time. Example: You bought a Drill Press, so that isn't Expense. Expense = printer paper or electricity = Poof! All gone every time you pay for it, already used up. Assets are Expenditure, not Expense, as Investments. Think of a $5,000 lighted sign on a building = fixed asset. Fixed Assets also might wear out over time; that is called Depreciation. They "depreciate" to show they lost a bit of value each year over their "useful life" per the tax regulations.

 

You bought a Reference List; it's not that you have it On The Computer = Fixed. It is like a Book or publication for reference. Yes, it is a Database. Don't confuse Program Standards (SQL, DB2) with what you bought. A Phone Book or Address Directory is also a database; a Store Catalog is a Database. You bought an Electronic Excel listing which is Data = database. It's not Touchable, which would make it Intangible asset, not Fixed asset, if it qualifies under the Asset regulations at all.

 

So, yes, if you paid $50,000 for a database, you would Amortize it over time and not take $50,000 as expense when you have No Income to match it against. Because that is called The Matching Principal. Your goal is to manage data under the tax regulations which includes abiding by The Matching Principal. That's why Depreciation and Amortization are something you should learn about.

 

As for Startup Expense, yes, this minor amount and a Static purchase (not going to include newer data unless you Keep Buying) is an Expense. As for it being Startup or not, there is Tax regulation for how to handle those earlier Costs you incurred, and Yes, this might fall under Startup.

 

That's why you work with your own CPA on the tax regulations that apply to you and your activity.

 

For specific example: I am in the US, "Mike in BC" is most likely in BC, which is Canada. We all have different Rules.  That's why a QB forum isn't where you get your Tax Regulation Guidance.