Question

Briefly summarize the accounting treatment for intangible assets, explaining the difference between purchased and internally developed intangible assets

Answer 1

Intangible assets can be purchased or internally developed. Purchased intangible assets are acquired from external parties and recorded at their purchase cost. Internally developed intangible assets are generated within the company and are expensed as incurred.

Step-by-step explanation:

Intangible assets are non-physical resources that provide future economic benefits to a company. There are two types of intangible assets: purchased and internally developed. Purchased intangible assets are acquired from external parties, such as patents, copyrights, or trademarks.

These assets are recorded at their purchase cost and amortized over their useful life. Internally developed intangible assets, on the other hand, are generated within the company, such as research and development expenses to create a new product. These assets are expensed as incurred and not capitalized.