h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

Hi Persy

I found your article quite interesting, but I would like a bit more insight about how accounting for 'intangibles' like future profit can be put into a real life taxable balance sheet. Do you know any of the backstory to how this developed?

All the best,

Jen

I'm not entirely sure what the question is, but I'll try to help a little

Intangibles are just like fixed assets (like a car or a building that a business has bought), but not physical. If a business purchases a logo or something from another business, that would be classified as an intangible asset.

I don't know about future profits being put in as intangible assets. Balance sheets are usually made after the end of the year, so it would be the previous year's profit that would go in. The profit goes into the capital and reserves section of a balance sheet separate from the intangibles. Balance sheets aren't like the other accounts that cover a period of time. They're like a photo of a business on a certain day with the information of what the business owns and owes.

I don't know much about the history of accounting. I always just assumed some guy got bored so made up some complicated system one day.

I hope that helped some. I'm planning to do something about the other final accounts when I finally crawl out from under the mount of work I'm currently trapped under.

Perse

Thanks, it did. I guess I'm interested in how financial systems can generate actual cash out of things that aren't tangible. I can see that a logo or 'goodwill' can have an actual cash value, but it's a difficult thing to put a true price on.

Hope the pile of work reduces soon!

The international accounting standards set out guidelines for what should and shouldn't go in accounts.Intangibles only go in when they've been bought. Goodwill is what one business will pay another when they're buying another business out. They'll just figurew that out between themselves