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MGT401 Financial Accounting 2 , GDB # 1 Opening date November 18, 2014, Closing date November 20, 2014 (5 marks)

Important announcement

Graded Discussion Board

Financial Accounting II (MGT401)


Dear Students!

This is to inform that Graded Discussion Board (GDB) No. 01 will be opened on  November 18, 2014 for discussion and last date for posting your discussion will be November 20, 2014.

Topic/Area for Discussion

 “Intangible Assets”

This Graded Discussion Board will cover first 08 lessons.

Graded Discussion Board

Financial Accounting II (MGT401)

Topic: Intangible assets


K&S (Pvt) Ltd. has recently established its business of readymade garments in Lahore. Mr. Aslam - owner of the company has tried to launch state of the art processes at every step from product design to manufacturing. K&S (Pvt) Ltd. needed funds aggregating to Rs. 2 Million, half of the amount was invested by owner and remaining requirement was fulfilled by obtaining debt from bank. During the financial year 2014-15, K&S (Pvt) Ltd. incurred the costs on:

a)      Preoperative expenses

b)      Promotional activities

c)      Designs and testing of prototypes

d)     legal fee to acquire the copyrights

e)      employee’s training

 Which of the above mentioned costs are eligible for capitalization as an intangible asset ? Justify your answer by giving valid points.

Important Instructions:

1. The GDB will remain open for 3 working days/ 72 hours.

2. Do not copy or exchange your answer with other students. Two identical / copied comments will be marked Zero (0) and may damage your grade in the course.

3. Obnoxious or ignoble answer should be strictly avoided.

4. Questions / queries related to the content of the GDB, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of GDB is over.

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Replies to This Discussion

Intangible Asset :

Reputationname recognition, and intellectual property such as knowledge and know how. Intangible assets are the long-term resources of an entity, but have no physical existence. They derive their value from intellectual or legal rights, and from the value they add to the other assets. Intangible assets are generally classified into two broad categories: (1) Limited-life intangible assets, such as patentscopyrights, and goodwill, and (2) Unlimited-life intangible assets, such as trademarks. In contrast to tangible assets, intangible assets cannot be destroyed by fire, hurricane, or other accidents or disasters and can help build back destroyed tangible assets. However, they normally cannot be used as collateral to raise loans, and some intangible assets (goodwill, for example) can be destroyed by carelessness, or as a side effect of the failure of a business. Whereas tangible assets add to an entity's current market value, intangible assets add to its future worth. An approximation of the monetary value of a firm's intangible-assets is computed by deducting the net value of its tangible assets from its market value. In some cases (such as the Coca Cola trademark), the value of a firm's intangible assets far outweighs the value of its tangible assets.


1. The paying off of debt with a fixed repayment schedule in regular installments over a period of time. Consumers are most likely to encounter amortization with a mortgage or car loan.

2. The spreading out of capital expenses for intangible assets over a specific period of time (usually over the asset's useful life) for accounting and tax purposes. Amortization is similar to depreciation, which is used for tangible assets, and to depletion, which is used with natural resources. Amortization roughly matches an asset’s expense with the revenue it generates.


a)     Preoperative expenses

Preoperative expense is expense incurred before starting operation of business i.e. Commercial operation all expense whether it is salary , fee of engineer , all expense which is necessary to start the operation needs to be capitalized under plant or building or machinery etc. Preliminary & preoperative are different. Preliminary is before incorporation of business while preoperative is after.

b)      Promotional activities


Promotion refers to raising customer awareness of a product or brand, generating sales, and creating brand loyalty. Promotion is also found in the specification of five promotional mix or promotional plan. These elements are personal selling, advertising, sales promotion, direct marketing, and publicity.

c)      Designs and testing of prototypes


In contrast with research costs development costs are incurred at a later stage in a project, and the probability of success should be more apparent.


d)     Legal fee to acquire the copyrights

Copyrights grant a business sole authority to reproduce and sale a software, book, magazine, journal, etc.


e)      Employee’s training

Educational preparation for performing a job that is typically provided to staff by the business that has recently hired them before they become active in service to the company. Employee training is increasingly required to assist the work force in using modern techniques, tools, strategies and materials in their jobs.

kiran yr muja ap k solution ki smjh nai a rahi

 ++..saba+b.com+3st* m discussion start ki hai ..jis ko jo samj aaye jo material milay wo yahan share karay ta k discussion aagay barhay ar solve karnay ki koshish ki jaye..its not complete solution.

Please Discuss here about this assignment.Thanks

Our main purpose here discussion not just Solution

We are here with you hands in hands to facilitate your learning and do not appreciate the idea of copying or replicating solutions.

saba correct explain the awl component 

a)     Preoperative expenses

b)      Promotional activities

 C)     prototypes

ya defination dkhu ab meri r  + malik ki post ki defination same ha...

plz discussion krain 

i think promotional activities ,legal fee to acquire the copyrights and employee's training intangible assets mai ainge pr valid reasons kia ho skte hain ??

tyba i agree with you but justification is the main thing 




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