What is the Difference Between Tangible and Intangible Assets?

In the world of accounting, understanding the difference between tangible and intangible assets is very important to keep track of a company's property. A tangible asset is anything that has a physical existence, meaning that it can actually be seen or felt by a person. An intangible asset is anything that a company owns that does not have a physical existence, meaning things like information and company logos. Both types of assets are very important parts of a company, and accountants need to be able to recognize both types of these assets.

One type of tangible assets are known as long-term assets. These are physical things that a company owns and expects to have for a long period of time. The most common examples of these types of assets include land, equipment, and buildings. Over time, all of these assets, except for land, have to be depreciated by an accountant working for the company. This means that they are not worth as much as time goes on as they were originally purchased for.

Buildings and equipment used by the company are depreciated as time passes. Additionally, companies incur other costs that have to be factored in to their balance sheet. For example, some building costs include the original price of the purchase of the building, any taxes that the company had to pay when purchasing the building, any kind of fees for attorneys and realtors, and any potential costs of having to fix up or maintain the building. Some equipment costs include the original price that the equipment was bought for, any taxes that had to be paid to purchase the equipment, the costs incurred for installing the equipment, and if the item was delivered, the cost for delivery.

Land is different from other tangible assets in that it does not depreciate, but instead is held to its historical cost. This means that it remains at the same price on the balance sheet whether the appraisal value goes up or down. It also sees some of the same additional costs as buildings and equipment do. For example, in addition to the price that the land was purchased for, companies have to factor in any potential taxes and any potential fees for people involved with the purchase.

Source:

Spears, Joan. Lecture: Accounting. November 23, 2009