Tangible vs Intangible

Difference Between Tangible and Intangible

The primary difference between tangible and intangible is that tangible is something which a person can see, feel or touch and thus they have the physical existence, whereas, the intangible is something which a person cannot see, feel or touch and thus do not have any of the physical existence.

Assets are anything that has some value stored in it and which is also owned by a firm or an individual and is expected to provide future economic benefit. It is the most basic requirement of the business, which is needed by the company or an organization for its smooth functioning. It is broadly classified as current assetsCurrent AssetsCurrent assets refer to those short-term assets which can be efficiently utilized for business operations, sold for immediate cash or liquidated within a year. It comprises inventory, cash, cash equivalents, marketable securities, accounts receivable, etc.read more and non-current assets. Non-current assetsNon-current AssetsNon-current assets are long-term assets bought to use in the business, and their benefits are likely to accrue for many years. These Assets reveal information about the company's investing activities and can be tangible or intangible. Examples include property, plant, equipment, land & building, bonds and stocks, patents, trademark.read more are then further classified into intangible and tangible assets.

What are Tangibles?

Tangible assetsTangible AssetsAny 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.read more can be referred to as the long-term resources which are physical and that are owned by an organization or the corporation, which has some economic value. Corporation acquires those assets to carry out its business operationsBusiness OperationsBusiness operations refer to all those activities that the employees undertake within an organizational setup daily to produce goods and services for accomplishing the company's goals like profit generation.read more smoothly and is usually not for sale. Examples for the same would be plants & machinery, buildings, vehicles, tools & equipment, furniture & fixtures, land, computers, etc. These assets mostly suffer from the risk of loss due to theft, fire, accident, or any other such disaster. Tangible assets do have a useful economic life, after which it has the risk of becoming obsolete. DepreciationDepreciationDepreciation is a systematic allocation method used to account for the costs of any physical or tangible asset throughout its useful life. Its value indicates how much of an asset’s worth has been utilized. Depreciation enables companies to generate revenue from their assets while only charging a fraction of the cost of the asset in use each year. read more is the common method that has been incorporated by the firms to spread the part of that asset’s expense over its economic life.

What are Intangibles?

These assets are the long-term resources that are incorporeal that is also owned by the organization, which have a specific commercial value. In this list, we can include trademark, goodwillGoodwillIn accounting, goodwill is an intangible asset that is generated when one company purchases another company for a price that is greater than the sum of the company's net identifiable assets at the time of acquisition. It is determined by subtracting the fair value of the company's net identifiable assets from the total purchase price.read more, copyright, patent, brand, blueprint, Internet domains, intellectual property, licensing agreements, etc.

Tangible AssetsIntangible Assets
FurnitureGoodwill
BuildingPatents
MachinerySelf-Developed Software’s
CashBrand Value
VehiclesLogo & Copyright
ComputersTrademark

Tangible vs. Intangible Infographics

Critical Differences Between Tangible and Intangible

Comparative Table

BasisTangibleIntangible
Basic DefinitionAssets that have a physical existence and that can be touched and can be felt are known as Tangible Assets.The opposite of the Tangible Assets is the Intangible Assets that don’t have or possess a physical existence, and the same cannot be felt or touched.
Values Tangible Assets have monetary value, and the same is materially present.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. read moreIntangible 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. read moreIntangible 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. read more which are incorporeal those have some economic value and economic life.
Value ReductionTangible assets are depreciated.Intangible Assets are amortizedIntangible Assets Are AmortizedAmortization 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.read more
FormTangible assets possess physical presence.Intangible Assets are abstract.
Scrap ValueTangible assets, when it becomes obsolete, can be sold in scrap.Intangibles do not have any scrap value.
LiquidationTangible assets are comparatively easy to liquidate.Intangible assets don’t possess liquidation valueLiquidation ValueLiquidation value is the value of assets that remain if the company goes out of business and is no more a going concern. Liquidation value is calculated only for tangible assets such as real estate, machinery, equipment, investment etc.read moreLiquidation value is the value of assets that remain if the company goes out of business and is no more a going concern. Liquidation value is calculated only for tangible assets such as real estate, machinery, equipment, investment etc.read moreLiquidation value is the value of assets that remain if the company goes out of business and is no more a going concern. Liquidation value is calculated only for tangible assets such as real estate, machinery, equipment, investment etc.read more as such.
External usageCreditors and Banks do accept tangibles assets as collateral.These kinds of assets cannot be used as collateral as creditors, and banks don’t consider the same.

Conclusion

Both intangible and tangible assets are and must be recorded by the company as those are required by law and per accounting standards. In comparison, tangible assets are very much vital for the organization, as it helps company in the production of services and goods. On the contrary, intangible assets assist the organization in creating their future worth.For example, if a company has a patent in creating a certain product then its revenue will not be affected soon as it will face less competition and thus this creates value for shareholders.

When comparing these assets, both have their cons and pros, but there is one more fact which is also true that intangible assets are much worthier as compare to the tangible ones.

They both have a similarity that they both have an existence at the face of a balance sheetBalance SheetA balance sheet is one of the financial statements of a company that presents the shareholders' equity, liabilities, and assets of the company at a specific point in time. It is based on the accounting equation that states that the sum of the total liabilities and the owner's capital equals the total assets of the company.read more. The Organization cannot survive without the tangibles. If those went for sale or liquidation, it is almost as good as its nearing bankruptcy take an example of IL&FS (Infra Structure and Leasing company) that has been defaulting on its debt payment in the year 2018 is in trouble as its selling its tangible assets to survive. Further Intangibles also are important as stated above like patents, trademarks, etc. those help the organization is keeping the competition around it lesser. Customers’ loyalty is also one kind of intangibles like most of the sophisticated consumers see value in Apple, which Apple admires and sees them as their value. 

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