Being a commerce student the term Intangible Asset is so common, what do we mean by intangible asset, which we cannot touch, feel, see etc. so according to this meaning prepaid advances is intangible assets as we cannot feel, touch or see, but it is not so prepaid advances are not intangible assets it is tangible, So friends discussing with you all the detailed meaning of the term Intangible Asset..............
Meaning of Intangible Asset: Intangible asset is identifiable, non monetary asset, without physical substance held for use in production of goods, rendering of services, rentals to others or for administrative purpose.
1. Meaning of Identifiable:- it means item which is capable for sale
2. Non Monetary :- it means item which are not monetary, monetary items are those items whose realisation is fixed under contract example debtors, B/R, prepaid advances, investments held for realisation under contract.
3. Asset:- means
a) resource and
b) which are under control of entity and
c) having future economic benefit
Example:- road constructed by factory owner for easy removal of goods, and to provide better commutation facility to employees which in results give himfuture economic benefit also, does that road becomes a asset for the owner? NO because the owner do not have any control on the road, the control is with the government.
4. Without physical substance of its own:- Intangible asset should not have substance of its own. It means substance can be of storage asset/ device.
Treatment of storage device
Expenditure on storage device is material
a) i) such expenditure can be separated from Intangible asset:- record intangible asset and storage device as separate assets
:- software purchased Rs 30000 including H.D.D. Rs 5000 we should record intangible asset for Rs 25000 computer Rs 5000(assumed 5000 is material)
a) ii) storage device cannot be separated from Intangible asset:- record Intangible asset or storage device which has been primarily purchased
b) Expenditure on storage device is not material:- ignore such cost record Intangible asset only
Example:-Tally software purchased Rs 25000 including C.D Rs 100 , we should record software at Rs 25000
5) Held for use:- it means which is acquired with intention of using it and not for resale
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