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Other Assets are just like fixed assets, although they are considered intangible.  They have the same purpose as Fixed Assets, and the following demonstrates different types of this category.

Patent Intellectual Property
A patent allows the owner to have a set number of years for which they have exclusive rights to a particular invention for which they can manufacture, use, and sell.  It also protects the owner from others infringing or profiting from their proprietary rights.

 

Trademark
A trademark consists of any figure, letter, word, mark, name, or symbol to help distinguish their particular company/brand from others.  It also protects the owner from others infringing or profiting from their proprietary rights.

Copyright
A copyright gives the owner the exclusivity to make copies, license, and promote a literary, musical, or artistic work in printed, audio, video, etc. works, which extend for the life of the author and for a period of 50 years after their death.

 

Intellectual Property
Intellectual property is thoughts that have commercial value, and includes copyrighted property, patents, business methods, and industrial processes.

 

Organization Costs
Organization costs refers to the cost of the formation of a company, which may include: attorney fees, state incorporation fees, and accountant fees.

 

Goodwill
Goodwill is considered a long-term asset when a company acquires another company’s entire business.  The formula is based upon the purchase cost of the business, minus its value from the tangible assets, as well as the liabilities obtained from its purchase.  It is also considered the value of a business based upon the expected continued customer patronage due to its name, reputation, and other factors which are deemed of value.

 

Amortization
Similar to depreciation, it is the process of expensing intangible assets over a certain period of time.

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The subject of Fixed assets have a time frame of useful life for at least 1 year and must be used in the operations of the business.

The Fixed Asset account refers to items that have a useful life of at least 1 year and are of a specific dollar amount determined by your Financial Policies and Procedures and recommended by your tax preparer.  There is no set dollar value to determine what a fixed asset is, which could be as low as $1.00, up to $5,000.00 and beyond.  These fixed assets stay on your GL for the duration that they are property of the company, even if they have lost their purchased value through depreciation.

Examples of this type of account include: buildings, computer equipment, vehicles, and land.  Leasehold improvements such as a new heating and cooling system you purchase for a leased office space can be tracked as a fixed asset, if it meets the guidelines of the value and useful life pre-determined from your company’s policies. 

 

 

In the case of Land, it cannot be depreciated and cannot lose its purchase value unless it has been determined through a legally recognized outside source and is recorded properly in your General Ledger of Accounts.

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In understanding current assets, first you must remember they have a time frame of liquidity for less than 1 year.  Below are some general descriptions of typical accounts in this category.

 

Accounts Receivable

The Accounts Receivable account is present only when a company is on the accrual basis of accounting, and they have extended credit to customers for which the presence of outstanding invoices is recorded.  When an invoice has been recorded as paid, the account is decreased.  When an invoice has been issued without receiving payment, it increases. 

An example would be if you send out an invoice for $100.00 and your customer doesn’t pay you for 2 weeks, you still have $100.00 in income.

 

Other Current Asset

The Other Current Asset account refers to items that can be converted into cash or inventory within 1 year.

Examples of this type of account are: inventory, pre-paid expenses, and employee loans.

 

Other Asset

The Other Asset account refers to items that are not tangible in an immediate fashion but have a cash value.

Examples of this type of account are: security deposit, goodwill, patents, and trademarks.

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There are traditional general accounting rules when numbering accounts, and it’s best to at least use 4 characters for each account.  Due to the expected longevity of the business as it continues to grow, it offers a business more flexibility as the addition of new accounts becomes a necessity for numerous combinations.  When developing your own numbering system, it’s recommended to prepare a COA outline and use it as a template for continued use throughout your business’ history, so as to help prevent an unorganized COA layout.

 

The following is a traditional list of the different types of accounts and their numbering range:

 

Asset accounts are classified in the 1000 range.

Liability accounts are classified in the 2000 range.

Equity accounts are classified in the 3000 range.

Income accounts are classified in the 4000 range.

Expense accounts are classified in the 5000 range.

Other Income accounts are classified in the 6000 range.

Other Expense accounts are classified in the 7000 range.

I hope this helps.  Check out our QuickBooks Training Classes in the Houston area.