CA Foundation Exam > CA Foundation Questions > Which one is correct?a)Goodwill is a fictitio...
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Which one is correct?
- a)Goodwill is a fictitious asset
- b)Closing stock is a wasting asset
- c)Preliminary expense is a current asset
- d)Patent is an intangible asset.
Correct answer is option 'D'. Can you explain this answer?
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Most Upvoted Answer
Which one is correct?a)Goodwill is a fictitious assetb)Closing stock i...
Explanation:
Intangible assets are those assets that have no physical substance but have value due to their legal or intellectual property rights. Patents are one such type of intangible asset.
Patent is an Intangible Asset:
A patent is a legal right granted to the inventor of a new invention, process, or design. It is an exclusive right that enables the inventor to exclude others from making, using, or selling the invention for a certain period of time. Patents are considered intangible assets because they do not have a physical form but have a value based on the legal rights they provide to the owner.
Other Options:
a) Goodwill is a fictitious asset - Goodwill is an intangible asset that represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. It is not a fictitious asset as it represents the reputation and brand value of the business.
b) Closing stock is a wasting asset - Closing stock is a current asset that represents the value of unsold goods at the end of an accounting period. It is not a wasting asset as it can be sold in the future.
c) Preliminary expense is a current asset - Preliminary expenses are expenses incurred before the incorporation of a company. They are treated as intangible assets and are shown under the head 'other assets' in the balance sheet.
Conclusion:
Hence, the correct option is D, patent is an intangible asset.
Intangible assets are those assets that have no physical substance but have value due to their legal or intellectual property rights. Patents are one such type of intangible asset.
Patent is an Intangible Asset:
A patent is a legal right granted to the inventor of a new invention, process, or design. It is an exclusive right that enables the inventor to exclude others from making, using, or selling the invention for a certain period of time. Patents are considered intangible assets because they do not have a physical form but have a value based on the legal rights they provide to the owner.
Other Options:
a) Goodwill is a fictitious asset - Goodwill is an intangible asset that represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. It is not a fictitious asset as it represents the reputation and brand value of the business.
b) Closing stock is a wasting asset - Closing stock is a current asset that represents the value of unsold goods at the end of an accounting period. It is not a wasting asset as it can be sold in the future.
c) Preliminary expense is a current asset - Preliminary expenses are expenses incurred before the incorporation of a company. They are treated as intangible assets and are shown under the head 'other assets' in the balance sheet.
Conclusion:
Hence, the correct option is D, patent is an intangible asset.
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Which one is correct?a)Goodwill is a fictitious assetb)Closing stock is a wasting assetc)Preliminary expense is a current assetd)Patent is an intangible asset.Correct answer is option 'D'. Can you explain this answer?
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