Real To Reel Is A Retailer. A Company Symbolwas Devolved By A Consultant At A Cost Of $154,000. How Should This Transaction Be Recorded And Reported?

899 words - 4 pages

Accounting is a system for providing quantitative, financial information about economic entities that is useful for making sound economic decisions. Accounting is often called the "language of business" because it provides the means of recording and communicating business activities and the results of those activities. (Albrecht, WS, Stice, JD, Stice, EK & Swain, MR 2005) The way that this is done is governed by the Regulatory and Conceptual Framework for Accountancy in Australia. The Regulatory framework consists of the rules, guidelines and legislation that govern the preparation and presentation of General Purpose Financial Reports in Australia. The Conceptual Framework is described by Kloot, LS, Sandercock, EK, Meigs, RF & Meigs, WB (2002) as "a coherent body of accounting theory or a set of interrelated concepts" with a purpose to "define the nature, scope and purpose of financial accounting and reporting". In this instance it concerns how the company symbol for Real to Reel should be recorded. The accountant must record the transaction in line with the guidelines set out by the framework. The aim of this essay is to compare the ways that the purchase of a logo may be recorded by a firm, and why they are correct. The correct method of recording this transaction will be examined.The transaction of Real To Reel's company logo that was developed by a consultant at a cost of $154,000 is an irregular transaction that may typically be difficult to place as to where it may be recorded. Several options available may perhaps be an Intangible asset, expense or otherwise. The correct option will be examined further on. This transaction could be recorded as either an asset, which are defined by Kloot, LS et al (2002) as "future economic benefits controlled by the entity as a result of past transactions or other past events" or may be recorded as an expense which are defined by Kloot, LS et al (2002) as "the consumptions or losses of future economic benefits in the form of reductions in assets or increases in liabilities of the entity, other than those relating to distributions to equity participants, that result in a decrease in equity during the reporting period" Classifying a transaction such as this isn't clear cut, mainly because the logo is an irregular transaction and it's intangible, ie. isn't physically material.The accountant can classify the company symbol as an intangible asset. An intangible asset is one that usually does not have a physical substance but is expected to provide future benefits to the entity. Intangible assets are a type of Non Current Asset. Intangibles derive their value from the rights that possession and use confer on their holder. Like property, plant and equipment,...

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