Paper

Quote #1: “In the latter case, construction in process is an asset, as described in last week’s article, “Property, Plant and Equipment (PPE).” But constructing an intangible is recorded as an expense, not an asset.”

An intangible asset is a type of asset that is not physical. According to the quote, an organization can classify construction as asset or expense. An asset refers to both tangible and intangible properties that a business owns. On the other hand, expenses are costs that the organization incurs. Buildings (construction) are considered as an asset. However, if a company uses cash in hand to construct a customer’s list, then it is grouped under expenses.

· What is the impact of construction on the profit margins of an organization?

· Can one classify costs incur on rentals under assets or expenses?

· Is building a structure that last for less than two week an asset or an expense?

· How can one explain intangible assets in a lay-man’s language?

Quote#2: “As a business journalist, understanding the accounting for intangibles can help you better understand how to read and use financial statements. For starters, the financials do not include most intangibles as assets.”

The quote states that it is not easy to understand the principle of intangibles. In many cases, entrepreneurs find it challenging to understand financial statements such as balance sheets and cash flow. However, this is not a big deal for accounting experts. They can predict that outcome of classifying intangibles as either asset or an expense. Many starters cannot use the inner eye to see recognize non-physical assets and classify them as assets. They, therefore, put them under expenses.

· What is the importance of financial statements in a business or an organization?

· Can any business prosper without preparing financial statements?

· Preparation of financial statement involves the use of labor as well incurring some costs. How do we categorize this cost? Is it an expenses or an asset?

Quote #3: “During this investment time period, one competitor has more assets and higher income than its competitor. However, both are essentially pursuing the same economic outcome, acquiring a customer list.”

The quote is about two competitors with different views on intangibles. One put a customer’s list under asset while the other competitor classifies the same tangible under expenses. The impact of this is that one competitor will have more asset and higher income than the other. In particular, the competitor who considers a customer list as asset will have more assets and income than its counterpart.

· In particular, what is the impact of classifying intangibles as assets or expenses on a business?

· Do these multinational companies use this approach of intangible assets and apply the ignorance of their competitor concerning this concept to remain on top?

· What is the impact of intangibles on cash flows?

Inquiry Plan

I plan to research more on the impacts of intangibles on the success and income of businesses. The articles do not provide tangible facts and evidence on its claims and arguments. Since accounting is not my areas of expertise, it is essential to use articles that apply simple language and academic writing convections that every individual can comprehend. Similarly, I would like to explore other articles that explain, using examples, how intangibles affect financial statements. The latter will enable me to follow up the contributions that this types of asset has on the financial statements. Last but not least, I will compare the views and opinions of my classmates regarding the matter. Thereafter, I will take a stance on the subject and support it using the available facts and evidence.

References

Orpurt, S. (2016). Business Basics: Intangible Asset Accounting - Reynolds Center. Retrieved from https://businessjournalism.org/2016/07/intangible-asset-accounting/