Concept Introduction:
Assets are resources which are owned by an organization to generate future benefits. For example a manufacturing company buys machine to produce goods and earn profits by selling them. Assets are classified into different categories as per their nature and usage. For example, machinery is classified under property, plant and equipment category.
To indicate: The difference between the prepaid expense and intangible assets.
Explanation of Solution
The difference between the prepaid expense and intangible assets is explained as follows:
Prepaid expense is not a physical asset. It is actually the amount paid in advance for an expense which is not accrued yet.For example, advance amount paid for insurance.
Intangible asset is not a physical asset. It is actually an ownership or right of using something, for example, patents, copyright and trademark.
An organization can sell an intangible asset but it cannot sell a prepaid expense.
A prepaid expense is generally written off within next accounting year, but a intangible asset is amortized in several number of year.
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Chapter 14 Solutions
Loose-leaf For Auditing & Assurance Services: A Systematic Approach
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Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College