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 assetTangible AssetAny physical assets owned by a firm that can be quantified with reasonable ease and are used to carry out its business activities are defined as tangible assets. For example, a company's land, as well as any structures erected on it, furniture, machinery, and equipment. 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
Let’s see the top differences between tangible vs. intangible assets along with 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 assetsIntangible AssetsIntangible Assets are the identifiable assets which do not have a physical existence, i.e., you can't touch them, like goodwill, patents, copyrights, & franchise etc. They are considered as long-term or long-living assets as the Company utilizes them for over a year. are those which have an economic value and a specific 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 an 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.
Tangible vs. Intangible Assets Comparative Table
|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 collateral.||Cannot be accepted as collateral|
|Value Reduction||Depreciation||AmortizationAmortizationAmortization of Intangible Assets refers to the method by which the cost of the company's various intangible assets (such as trademarks, goodwill, and patents) is expensed over a specific time period. This time frame is typically the expected life of the asset.|
Both tangible vs. intangible assets are recorded by the company in their books of accounts. Tangible assets are highly crucial 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 essential to know that determining the Tangible assets of a company offers various benefits; the usefulness varies significantly 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 –