Differences Between Tangible and Intangible Assets
The primary difference between tangible and intangible assets is that tangible assets are the assets having the physical existence and can be felt and touched whereas the intangible assets are the assets that do not have any physical existence and the same cannot be felt and touched.
A tangible asset is something that has a physical existence and a certain economic value. These are the physical resources essential for conducting business operations in a smooth manner and are not saleable. Some of the examples are:
- Land & Buildings
Intangible assets are those which do not have a physical existence but possess commercial value and act as a long-term resource to the firm. Some of the instances include:
Tangible vs Intangible Assets Infographics
- A tangible asset is something that is owned by an individual or organization utilized for conducting business activities over a long period of time. Intangible assets are those which have an economic value and a certain life. These are considered as earned over the hard work executed over a long period of time.
- The existence of tangible assets is essential for the functioning of an organization but the non-existence of intangible assets will not have a widespread impact on a firm. It offers a cushion to those associated with the name it has made for itself in the industry.
- Tangible assets can be converted into cash since it can be viewed to the eye and can be weighed in monetary terms whereas later are difficult to convert into cash on an immediate basis.
- Tangible assets can be destroyed by fire, accidents or human negligence whereas intangibles cannot be destroyed by fire or other such disasters but by carelessness or any side effect of a business decision.
- The Book market value and a book value of a tangible asset change due to depreciation whereas in the case of intangible asset the market value changes but the book value shall remain the same.
- The value of a tangible asset adds to the current market value but in the case of the intangible asset, the value gets added to the Potential revenue and worth.
|Basis||Tangible Asset||Intangible Asset|
|Meaning||Owned by an Organisation having monetary value and physical existence||Assets which are not existing visually but poses certain economic life and value|
|Valuation||Monetarily possible||Difficult to measure in financial terms|
|Collateral Acceptance||It can be accepted as a collateral||Cannot be accepted as collateral|
Both tangible vs intangible assets are recorded by the company in their books of accounts. Tangible assets are highly important for any organization since it aids in the smooth running of the operations, intangible assets help in creating future worth of the firm. Though both have their pros and cons, they have an impact on the functioning of an organization.
It is also important to know that determining the Tangible assets of a company offers various benefits, the usefulness varies greatly across industries. For e.g. in the case of hospitals or medical device manufacturers, the intangible assets are far more valuable as compared to tangible ones. On the other side, industries such as real estate would have intangible assets but the tangible ones will provide the revenues they require for operations.
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This has been a guide to Tangible vs Intangible Assets. Here we discuss the top differences between them along with infographics and comparative table. You may also have a look at the following articles –
- Top Best Differences Between Current Assets vs Non-Current Assets
- 5 Best Differences Between Assessed Value vs Market Value
- Top 7 Differences Between Depreciation vs Amortization
- Differences Between IFRS vs Indian GAAP
- Examples of Current Assets
- Net Asset Value Formula
- Non-Current Assets
- Assets vs Liabilities