A precious product or person is an asset. Assets are divided into several types based on their physical existence, life span, character, etc. The distinction between tangible and intangible assets is due to their physical presence in a business. In layman's terms, an asset is a piece of property owned by an organization or a person valued and available to meet liabilities
Tangible Assets
Understanding tangible assets is very easy. Anything that can be touched is tangible. Tangible Assets are assets that have a physical presence and can be felt and touched. The main distinction between tangible and intangible assets is that one can be touched while the other exists only on record and balance sheet.
Fixed and Current assets are two types of this asset.
Current Assets
Current assets are items such as inventory, cash, liquid financial instrument, or securities. These items are generally used within a year or two. They can be quickly converted into cash for emergencies.
Fixed Assets
The non-current assets that a business entity uses in its operations for more than a year or two. On the balance sheet, they go under Property, Plant, and Equipment (PP&E) section. The example of fixed assets is buildings, lorry (vehicles), machinery, furniture, etc. Fixed assets generate revenue, which is necessary for running the business operations.
Tangible assets examples list:
Intangible Assets
Intangible assets, the polar opposite of tangible assets, do not have a physical reality and cannot be touched or felt. Depending on the type of asset, they are definite or indefinite intangible assets.
Intangible assets examples list:
Intangible assets examples list:
An example of a definite intangible asset is a company patent because it will expire once the patent term expires. On the contrary, a firm brand name will remain throughout its existence.
Tangible assets are the easiest to calculate since they have a limited period or life span. Initially, tangible assets are recorded in the balance sheet but later on recorded in the income statement.
Inventory and stocks are tangible assets and come under the cost of goods sold. Cost of goods sold means cost of production of goods. Therefore, inventory used in production is entered in the cost of goods sold. Likewise, fixed assets such as machinery and equipment are other examples of tangible assets. Balance sheet covers fixed assets. After their life span, they are entered in the income statement as depreciation.
Depreciation means distributing the cost of an asset over a while, these assets generate revenue for the company. Depreciation helps to calculate the wear and tear of the tangible asset.
In financial accounting, calculating intangible assets can be difficult because they are subjective in nature. Some of the intangible goods can have purchase prices like intellectual property rights, patents, licenses, etc. Initially, like fixed assets, intangible assets are entered into the balance sheet as long-term assets. The intangible assets cost can spread over some time. As tangible assets suffer from depreciation, likewise intangible assets suffer from amortization. Amortization calculates the costs of intangible assets over a year and comes under the income statement.
Tangible benefits are quantitative and measurable and utilized to determine a job's worth. The benefit value is equal to person's skill set. Engineers, for example, receive more tangible perks than a waiter. Intangible benefits, on the other hand, are significantly more difficult to quantify due to their subjective nature. Intangible advantages are derived from a person's attitude toward their profession. Job happiness or satisfaction is the main criteria for intangible benefits.
Companies having a high share of tangible assets can be found in a variety of industries.
Businesses that manufacture cellphones, computers, and other electronic gadgets rely on tangible assets to make their products.
Companies that manufacture items, such as the vehicle, equipment, and steel sectors, have tangible assets. The factory machinery, computers, land, building are all tangible assets.
The oil industry is one of the largest industries, which owns a large number of tangible fixed assets. Petroleum companies own a lot of drilling machinery and equipment to explore oil. These companies have a lot of capital to purchase costly tangible assets. The physical existence of these costly fixed assets is necessary for a country’s economic life.
Intangible assets are nonphysical long-term assets. Because intangible assets are generally intellectual assets, assigning a value to them is challenging due to the unpredictability of future benefits.
Intellectual property comprises intangible assets, which include:
The Healthcare sector has high usage of intangible assets. The drug companies like Sun Pharma and Dr. Reddy have brand value. They top the sales chart in India.
In highly competitive marketplaces, intangible assets such as patents on formulations and recipes, as well as brand name awareness, are key intangible assets for consumer products and services organizations. Pepsi Company is an example of an intangible asset, with the price of its well-known brand name almost unquantifiable and a key driver of the company's success and profits.
In the technology sector, particularly those dealing with PC, patents, copyrights, key research and development staff are important intangible assets. Intangible assets are generally found in companies like Microsoft and Apple.
Intangible assets such as publishing rights and key talented individuals are held by entertainment and media firms. The copyrights to all of musical artist's songs are an example of intangible assets in the music industry. Brand recognition can also be related to musicians and vocalists. The music companies may earn a lot of money through the rights of the songs. Despite the fact that these assets have no physical attributes, they provide the music firm and the musical artist with a future cash reward.
Intangible assets, such as patented logos, technologies, and brand names are also important in the vehicle sector. Brand names like Mercedes and BMW are worth billions of dollars.
In today's fast-paced technology sector, both real and intangible resources are critical. The company's tangible and intangible resources enable it to produce a lot of money and continue to operate. The tangible resource ensures that the company's operations are optimal and that problems are minimized. In a fast-paced technology market, a corporation cannot afford to make a mistake; if it does, it will suffer in the fast-paced technology sector. The tangible resource is what allows a company to stay in the market and make money. The intangible resource allows a company to obtain knowledge that is not available to other companies and makes it easier to manage the organization.
Tangible Costs
Tangible costs are costs that can be seen and predicted. In many cases, physical costs are coupled with products that also have intangible costs. The money paid to a new employee to replace an old one is a concrete expense. The experience that the previous employee takes with him when he departs is an intangible cost.
Intangible costs
In order to quantify the influence of a scenario or occurrence, an intangible cost is a subjective value assigned to it. Although it is more difficult to quantify intangible costs, they do have a genuine, recognizable source.
The following are examples of intangible costs:
1) Employee morale is slipping.
2) Defamation of a company's brand or reputation
3) Customer dissatisfaction is a key example.
Intangible benefits, which are also called soft benefits. These benefits are subjective in nature and cannot be quantified like job satisfaction. Many employees will go for intangible benefits rather than tangible benefits.
An intangible result is one for which you don't provide a pecuniary value because doing so would be useless and undermine the reliability of your results.
Conclusion
The main difference between tangible and intangible assets is that you can touch and feel tangible assets, whereas intangible assets are subjective in nature. Fixed and current assets are two types of tangible assets. Moreover, definite or indefinite are two types of intangible assets that are classified. Both can be entered on the balance sheet. Examples of tangible assets are machinery, building, vehicles, land. Examples of intangible assets are intellectual property rights, copyright, company logo, goodwill, patents trademarks, etc.