It can be intangible or tangible as it can be in the form of services or goods

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.

Inhaltsverzeichnis Show

• Difference Between Tangible and Intangible
• What are Tangibles?
• What are Intangibles?
• Tangible vs. Intangible Infographics
• Critical Differences Between Tangible and Intangible
• Comparative Table
• Recommended Articles
• What can be tangible or intangible as it can be in the form of services or goods?
• What is tangible and intangible services?
• What are intangible goods and services?
• What is a tangible service?

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 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 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 assets are assets with significant value and are available in physical form. It means any asset that can be touched and felt could be labeled a tangible one with a long-term valuation.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 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. DepreciationDepreciation 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, goodwillIn 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 vs. Intangible Infographics

Critical Differences Between Tangible and Intangible

• Assets that are acquired by the organization, which is having some monetary value and is materially present is known as tangible assets. Incorporeal assets that have a particular useful life, as well as economic value, are known as intangible assets.
• Tangible assets are the assets that are present with the organization or say with the company in their physical existence. On the other hand, intangible assets are the assets that do not exist physically; instead, they are stated as abstract.
• While the value reduction for the tangible assets occurs depreciation, and for intangible assets, it happens through amortization.
• Due to the significant material presence in tangible assets, those can be readily convertible into cash when required or in case of emergency. Still, conversely, it would be a bit difficult to sell those intangible assets, namely trademark or goodwill, etc.
• Salvage value or the scrap value is the residual value of the assetResidual value is the estimated scrap value of an asset at the end of its lease or useful life, also known as the salvage value. It represents the amount of value the owner will obtain or expect to get eventually when the asset is disposed.read more after it has been completely depreciated. Tangible assets have scrap or salvage valueSalvage value or scrap value is the estimated value of an asset after its useful life is over. For example, if a company's machinery has a 5-year life and is only valued $5000 at the end of that time, the salvage value is $5000.read more, but intangible assets, as stated earlier, do not have any kind of scrap or salvage value.
• Tangible assets, as mentioned in the above table that those are accepted by the lenders or creditors while granting a loan to the firm, for example, granting property loans and mortgaging that property against that, such kinds of loans are called as secured loansSecured loans refer to the type of loans approved and received against a guarantee or collateral. If they fail to do so, the lending institution acquires the collateral to compensate for the amount that the borrowers were allowed.read more. As opposed to this, the organization or firm cannot use intangible assets as collateral value to raise loans.
• The Cost of tangible assets can be easily determined, whereas the cost of intangible assets involves complications as and is harder to determine.

Comparative Table

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 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. 

Recommended Articles

This article has been a guide to the Tangibles vs. Intangibles. Here we discuss the top differences between Tangible and Intangible Assets along with infographics and comparison table. You may also have a look at the following articles –

• Negative Goodwill
• Does Land Depreciate
• Opex vs. Capex
• Accumulated Depreciation – An Asset or Liability