A Company Symbol Or Logo Was Developed By A Consultant At A Cost Of $250,000. How Should This Transaction Be Recorded And Reported?

807 words - 3 pages

Initially, before emphasising on the essay topic, I would like to briefly describe the five accounting elements. The five accounting elements include assets, liabilities, equity, income and expenses. According to Hogget, Edwards, Medlin (2006, p.486) first, an asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity, two liabilities are those present obligation of the entity arising from past events, three equity is a residual interest in the assets of the entity after deducting all its liabilities, four income increases the economic benefits during the accounting period in the form of inflows or enhancements of assets that results in increase in equity and finally expenses decreases in economic benefits during the accounting period in the form of outflows that result in decline in equity.This essay topic is determined on how to record and report the cost of $250,000 paid for the company logo developed by the consultant. The first thing is that we should draw attention to is the nature and life of the company logo. As the Company has paid to a consultant for the logo, so it is both a liability nor an income, but it can be treated as an expense and on the other hand the company logo do not have any physical substance, so it can also be treated as an intangible asset. According to Trotman, Gibbins (2003, p.370) Intangible assets are long term assets that do not have a visible physical existence, as do land, buildings or equipment. Intangible assets include patents, copyrights, trademarks and other such legal property. So it can be recorded and reported as an intangible asset in the balance sheet. The basic principles followed in IAS 38/AASB 138 to account for intangible assets are similar to those used to account for property, plant and equipment. Those intangibles which are purchased by an entity are recorded initially at their cost (ex GST) (Hoggett, Edwards, Medlin 2006).A Company Logo can prove to be as a future economic benefit to the company. It is with the help of the company logo that a company is represented as a brand name. Without a company logo, a product cannot exist in the market and the company cannot get any name and recognition. The future economic benefit depends on the quality of the product, location...

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