Trademark is a registered symbol that represents that the specific product is the intellectual property of the manufacturer or the distributor of the product and only these specified personnel have a right to manufacture and distribute the product and realize profits on it.
Intangible assets of the company are the assets that are not in the physical form. They are also referred to as the intellectual property of the company. Intangible assets of the company are not used in day-to-day operations like the tangible assets. Nonetheless, these assets are used in the operations of the company and help in realizing profits.
Insubstantial assets have two primary forms. One of these is the legal intangible assets.
Legal intangible assets are the assets that are trade secrets of the entity for example, patents, copyrights and trademarks of a company.
Trademarks in accounting
In accounting, a trademark is an intangible asset of an entity that helps the company in realizing profits. Since these types of assets are legal assets, and they do not have any physical form and do not help in company’s operations like property, plant and equipment, these assets are recognized as the trade secrets of the entity. These assets are classified separately in the company’s asset register and are properly accounted for in the company’s accounts.
Role of trademarks for business
If an entity is in the business of designing special and customized equipment or has its own brand with a range of products, these will be recognized as the assets of the company as these items will help the company in gaining profits. Now, if the company wants to safeguard these assets to mitigate the safety threats to these assets, the company will register a symbol formally for its entire product that will show that these products are the intellectual property registered by the name of the company. This will be a proof that no other party is allowed to realize a profit on the behalf of the company unless allowed.
Accounting of trademarks as intangible assetsThe intangible assets of the company are accounted for properly in the financial statements of the company. Since trademarks are the part of the intangible assets, these are included in the balance sheet. However, if a trademark is generated internally, then it will not make a part of the balance sheet as this is not purchased from some other party and might have the cost of $0.