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Tangible and Intangible Assets - Research Paper Example
Finance & Accounting
Pages 7 (1757 words)
There are two types of assets in business, intangible assets and tangible assets. Tangible and intangible assets also have different methods of calculating their rate of depreciation thus it is absolutely necessary for accountants to differentiate them. …
Intangible assets cannot be seen or felt that is they are non-physical in nature and they are usually non-monetary. Intangible assets are basically the long term resources of the given firm, usually the legal rights of the firm including patents, trademarks, goodwill and copyrights. Intangible assets cannot be destroyed by fires or other tragedies and they usually add value to the company’s financial worth.
Tangible assets are physical and identifiable and can be seen and touched. Since businesses are different they also have different tangible assets depending on their type of business. A company’s financial worth is determined by the amount of tangible assets that it has in its possession. Tangible assets can further be categorized into current and fixed assets. Current assets consist of assets that can be easily converted to cash/liquidated. An example is the firm’s bank accounts and its inventory (Hoffman, 2012). Fixed assets are not easily liquidatable and most generally depreciate with time except land. Fixed assets are usually used up in the production process and they may include machinery, equipments, vehicles, land and buildings. Financial recording of tangible and intangible assets is usually done differently, with the tangible assets further divided into current and fixed assets.