Tangible assets are physical, measurable resources; like property, plant, and equipment, used in a company’s operations to produce a profit. These assets include anything with a physical nature that is used within a company.
Explanation :
These resources can be divided into two main categories: current and fixed. Current assets are resources that will be consumed in the current period like inventory. Fixed assets are long-term resources that will provide value for future periods to come. Some examples include machinery, vehicles, and buildings. These resources can be damaged, repaired, stolen, and purchased because they are real items that get used in the normal course of business. Management must ensure these resources are guarded and maintained properly in order to preserve their usefulness. Tangibles can also be used as collateral for loans. All tangibles are reported on the balance sheet at their historical cost, but some have special reporting requirements. Long-term fixed assets must be depreciated over their useful lives with the accumulated depreciation reported on the front of the balance sheet.
In a nutshell :
- Comprehensively, companies have two types of assets: tangible and intangible.
- Tangible assets have a real transactional value and usually a physical form.
- Tangible assets usually account for the majority of a firm’s total assets.
- Tangible assets can be recorded on the balance sheet as either current or long-term assets.
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