a bad example of essay

I am working for the AFF 5130, 5000 words, really need a lot of work. Just for relax, I check my computer, and I find the first essay since I came to Australia. It is an essay for Accounting information system. I can’t find the question, but it was how to record a transaction which is a company buys a logo. Or something like that. I looked it again. It is really not a good essay, the structure is poor. No introduction, no conclusion. I can’t remember how many marks I got, maybe 8 out of 20. I don't know. And this is the only essay in that semester. Very poor. But after that, I got C+ on average of all my rest of assignments.


Caution: I hold the copyright of the following essay, please do not copy it for commercial purpose.

The way to record the transaction of the Real to Reel’s logo

Hoggett, Edwards & Medlin (2006) defined accounting as “the process of identifying, measuring, recording and communicating economic information to permit informed judgments and economic decisions by users of the information”. “Recording is the process of systematically maintaining a file of all transactions which have affected the business entity after they have been identified and measured”, (Hoggett, Edwards & Medlin, 2006, p.8) and recording the transaction in the right way is important to both internal and external users. A good accounting report (recording in the right way) can help the internal users to make right decisions, and help the external users to understand the report easily also help them to make some decisions such as buy some companies’ shares. In this case, Real to Reel is a retailer of videos for weddings and parties. A company logo was developed by a consultant; this transaction was cost $350,000. The aim of this essay is to discuss the ways of recording transaction and explain how the accounting theory relates to this transaction; finally a recommendation will be given for the recording and reporting of the $350,000.

This transaction could be recorded in two ways; the first way is that $350.000 can be recorded as asset. Using this way to record the transaction is because of the definition and features of asset. The Framework defines assets as “resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity” (Trotman & Gibbeins, 2005, p.427). And asset has three fundamental characteristics: firstly, the asset has future economic benefits. The future economic benefits are used to provide goods and services for exchange, with the objective of generating net cash flows. For instance, through the sale of the asset or the sale of the output produced through the use of the asset. Secondly, the asset should be controlled by the entity. That means the entity has the capacity to benefit from the asset in pursuing its objectives and to deny or regulate the access of others. Thirdly, the transaction or other event giving the entity control over the future economic benefits must have happened. The Framework states that an asset should be recognised in these two situations: first one is probable that any future economic benefits associated with the item will flow to the entity: and the other one is that the item has a cost or value that can be measured with reliability. (Trotman & Gibbeins, 2005, p.428) In this case, the logo can be considered as a kind of asset, the reasons are listed as follow:

1. The logo can bring the future benefits for the company, because if the logo is impressed, people can remember the production easily. The logo is a tool to make money for the company.

2. The logo is controlled by the company, after the logo is designed; the company has the right to use it. If the company doesn’t like the style of the logo or won’t use it any more, the company even has the right to exchange it.

3. The logo can be measured by dollars. Exactly to say, it’s $350,000.

To sum up, $350,000 should be recorded as an asset, because it is controllable and measurable, and it can bring the future economic benefit. This transaction should be written in the Statement of Financial Position.



The second way to record this transaction is that $350,000 can be record as expense. The Framework states that “expenses are decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrence of liabilities that result in decreases in equity.” In this case, the transaction could be recorded as debit at expense, and credit as cash at bank with the amount of $350,000, because Real to Reel has paid $350,000 for the logo. In another word, the logo was cost the company $350,000, so $350,000 should be recorded as expense. This transaction should be recognized in the income statement.



In conclusion, to compare these two methods, it is clearly that the first one-$350,000 is recorded as asset is better than the second one. Because the logo can bring the future economic benefit, also it is controllable and measurable; it’s more reliable and relevant than using the second methods. To consider this question in another aspect, assets can be classified to two groups- tangible and intangible. Jeffrey Faux (2003) defined intangible assets “as non-monetary assets without physical substance”. Common forms of intangible assets include patents, goodwill, masthead, brand names, copyrights, research and development, and trademarks (Faux, 2003, p.1). According to this definition, companies’ logo can be considered as a kind of intangible, so $350,000 should be recorded as asset. The transaction does cost the company some money, but in the long term, the logo can bring the future benefit for the company. And according to the Framework, an expense should be recognised when: a, it is probable that the consumption or loss of future economic benefits resulting in a reduction in assets and/or an increase in liabilities has occurred; and b. the consumption or loss of future economic benefits can be measured reliably. (Trotman & Gibbeins, 2005, p.552), but in this case, the logo doesn’t cause the decrease of the future benefit. So the transaction had better not be recorded as expense. Consequently in the General Journal, logo should be recorded on the debit side, and the amount is $350,000. On the credit side, the amount is 350,000, and the accounting name is Cash at Bank. And it should be recorded in the Statement of Financial Position (Balance Sheet), the logo is written as asset, and classified under non-current assets.



List of references

Hoggentt, J., Edwards, L. & Medlin, J. 2006, Financial accounting in Australia, 6th edn, John Wiley & Sons, Brisbane.

Faux, J. 2003, Australian Financial Accounting, McGraw-Hill Australia, Sydney.

Trotman, K. & Gibbins, M. , 2005, Financial accounting, 3rd edn, Thomason, Australia