Patents
Definition: Exclusive rights to an invention
Scope:ModerateDifficulty:Easy
Exclusive rights to an invention
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Purchase patent | ||
| Acquire patent for $50,000; 20-year life. | ||
| PatentsAsset+ | $50,000 | |
| CashAsset− | $50,000 | |
| Intangible asset with finite life. | ||
| 2. Annual amortization | ||
| $50,000 / 20 years = $2,500. | ||
| Amortization ExpenseExpense+ | $2,500 | |
| PatentsAsset− | $2,500 | |
| Cost systematically allocated over useful life. | ||
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.
PatentsPatentsAssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$50,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$2,500.00
$47,500.00
CashAsset account. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$50,000.00
$50,000.00
Amortization ExpenseAmortization ExpenseExpenseA cost incurred in the process of earning revenue. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$2,500.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$2,500.00
DurationLong-Term
External Links
- Patent — Wikipedia