Tangible Assets - Meaning, Examples

Tangible assets are assets with a specific monetary worth and often have a physical shape. These assets are incredibly important to a company since they have value and are crucial to running it daily.

These assets are things that can be touched and seen. They may also sustain damage from accidents, fires, and other natural disasters. The purchase price or acquisition cost of the physical assets is known.

What are the Tangible Assets?

Tangible assets are physical assets that a business or organization can touch or see. These assets have a physical form and provide value to the entity. Examples of tangible assets include buildings, machinery, vehicles, inventory, and equipment.

Tangible assets are essential to a company's balance sheet, representing the tangible resources that contribute to its overall financial health and operational capabilities. They can be readily quantified in monetary terms and are subject to depreciation over time as they wear out or become obsolete.

What are Intangible Assets?

Intangible assets are valuable assets possessed by a corporation or organization that lack physical form and cannot be touched or seen. Instead, they reflect non-physical assets that have considerable value and contribute to an entity's total worth. Examples of intangible assets include patents, trademarks, copyrights, brand recognition, intellectual property, and goodwill. These assets are crucial because they may boost a company's competitive edge, revenue potential, and long-term sustainability.

Tangible Vs. Intangible Assets- Differences

It is essential to understand that these two categories represent organizations' distinct types of assets. The table below highlights the key differences between these two asset types:

Types of Tangible Assets

In accounting and finance, tangible assets can be classified into two primary categories: Fixed Assets and Current Assets. Let's explore these two types of tangible assets:

Fixed Assets:

Fixed assets, also known as non-current or long-term assets, are real resources that a corporation purchases to utilize over a prolonged period. These assets are crucial for the company's operations and are not planned for rapid sale. Fixed assets often provide long-term advantages to the firm and are reflected on the balance sheet at their historical cost (the price at which they were bought). Examples of fixed assets include:

• Property, Plant, and Equipment (PPE
• Furniture and Fixtures
• Investments in Subsidiaries
• Natural Resources

Current Assets:

• As the name indicates, current assets are assets that a firm plans to turn into cash or use within the usual operating cycle, often one year. These assets are considered more liquid than fixed assets because they may be rapidly utilized to satisfy short-term financial commitments. Current assets are reported on the balance sheet at their current market value or the lower of cost and market value. Examples of current assets include:
• Cash
• Accounts Receivable
• Inventory
• Prepaid Expenses
• Short-term Investments

Tangible Assets Examples

Here are some illustrative examples of tangible assets:

Buildings: These include structures like office buildings, factories, warehouses, and retail stores that a company owns for its operations.

Machinery and Equipment: These encompass the tools, machinery, and equipment used in manufacturing, production, or other business activities.

Vehicles: Tangible assets can also include a fleet of vehicles owned by a company, such as delivery vans or company cars.

Inventory: The products and materials held in stock for sale or used in the production process are tangible assets. This can range from raw materials to finished goods.

Land: Real estate properties and land holdings that a company owns fall under tangible assets.

Furniture and Fixtures : These items include office furniture, shelving, and fixtures used for business operations or in retail settings.

Cash: While most tangible assets are physical in nature, cash itself is also considered tangible as it can be held and used directly for transactions.

Computers and Technology: Computers, servers, and technological devices used in daily operations are tangible assets.

Artwork and Collectibles: In some cases, businesses may own tangible assets like valuable artwork or collectibles for various purposes, including aesthetic or investment value.

Manufacturing Plants: Large-scale facilities used for production and manufacturing processes are tangible assets for companies in those industries.

How to Record Tangible Assets in Balance Sheet

Tangible assets are recorded on a company's balance sheet in a specific manner to represent their value and impact on the financial position accurately. Here's how tangible assets are typically recorded:

Identification and Valuation : Assets like buildings, machinery, and vehicles are assessed for their market value or historical cost.

Categorization: Tangible assets are categorized, such as Property, Plant, and Equipment (PPE) or Current Assets.

Depreciation: Long-term assets may be subject to depreciation to reflect decreasing value over time.

Balance Sheet Reporting: Tangible assets are listed under "Assets" on the balance sheet, with a separate entry for "Accumulated Depreciation" if applicable.

Disclosure: Financial statement footnotes often provide additional details about depreciation methods or revaluation.

By recording tangible assets in this manner, a company presents a clear and transparent view of its physical resources, their values, and how they contribute to the organization's overall financial health.