Patents in accounting
I need help again!
I have to create a income statement, owners equity & balance sheet but I am stuck on one thing. Is a patent an asset or expense? All it says is patent and gives an amount on my example. No explanation nothing .... I know that you have to pay for a patent but you can also make money on a patent as well (or am I wrong). If anyone knows which category I should place this in I would be ever grateful and I hope to grasp these concepts soon ... does anyone also know of an online tutor for accounting? I am getting desperate for help and I am taking my accounting class through distance education which means no classroom time ... thanks for all the help with both questions!
1 ReputationA patent is an intangible asset.
When you buy it, the JE is:
Dr. Patent
Cr. Cash
At the end of the year, you also have to check if the value of the patent has gone down and whether you have to write it down or not.
If the intangible asset has an unlimited life, there is no amortization, but you must test for impairment every year.
Since patent’s do have limited lives, you are right Kong, is should be amortized over its life.
Dr. Intangible Asset $1,000,000
Cr. Cash $1
Cr. ? $999,999
Would the extra amount be taken to equity or a revaluation reserve?
Dr. Intangable asset $1
Cr. Cash $1
If the company decides to sell it for more because they feel it is worth more then its recorded as a gain from sales
Dr. Cash
Cr. Intangable asset
Cr. Revenue from sales
Brilliant first post, especially when you dug up a thread that hasn't been posted to for a year.
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