Tangible assets are assets That have a definite monetary value and physical form. Tangible assets are of much importance to a business as they hold a certain value and are very essential for the daily operations of the business. The tangible assets have a clearly defined purchase value or acquisition cost.
Fixed Assets: Fixed assets refer to those assets that are very much essential for the business in the long run and are not readily available to be converted into cash at the end of an accounting period. Fixed assets are required for the day to day operations of the business. As fixed assets cannot be converted into cash, therefore they must be accounted for in the current accounting period and this is achieved by the means of depreciation. Examples of fixed assets are land, equipment, and machinery.
Current assets: Current assets are defined as those assets that are useful in the business for a short period of time. In other words, the current assets have a short life span as they can be easily converted into cash during the accounting period.
Current assets may or may not possess any physical presence but are very useful as they have a definite value. They are highly liquid in nature which means it is very easy to convert them into cash. Examples of current assets are inventory, cash, and cash equivalents.
Characteristics of Tangible Assets
The following are some of the characteristics of tangible assets:
- These assets have a physical appearance and we can touch them.
- It can be used as collateral for obtaining loans for business expansion.
- These are essential for maintaining the day to day business operations.
- They play a role in determining the capital structure of the business.