Fixed Assets vs. Tangible Assets

Attribute	Fixed Assets	Tangible Assets
Physical form	Yes	Yes
Depreciation	Yes	Yes
Value	Recorded at historical cost	Recorded at historical cost
Useful life	Long-term	Long-term
Physical count	Required	Required

Definition

Fixed assets and tangible assets are both important components of a company's balance sheet. Fixed assets are long-term assets that are used in the production of income, such as buildings, machinery, and equipment. Tangible assets, on the other hand, are physical assets that have a definite market value and can be seen and touched, such as inventory, land, and vehicles.

Characteristics

Fixed assets are typically used by a company for a long period of time, usually more than a year. They are not meant for resale and are essential for the company's operations. Tangible assets, on the other hand, can be used up or depleted over time. They are usually held for the purpose of generating revenue or for day-to-day operations.

Value

The value of fixed assets is recorded on the balance sheet at their original cost, less any accumulated depreciation. This means that the value of fixed assets decreases over time as they are used and depreciated. Tangible assets, on the other hand, are recorded at their current market value, which can fluctuate based on market conditions and demand.

Depreciation

Fixed assets are subject to depreciation, which is the process of allocating the cost of an asset over its useful life. This is done to reflect the decrease in value of the asset over time. Tangible assets, on the other hand, may also be subject to depreciation, but this is not always the case. Some tangible assets, such as land, do not depreciate in value.

Examples

Examples of fixed assets include buildings, machinery, vehicles, and computer equipment. These assets are essential for the company's operations and are not meant for resale. Tangible assets, on the other hand, include inventory, cash, land, and equipment. These assets have a physical form and can be seen and touched.

Use in Financial Reporting

Fixed assets are typically reported on the balance sheet under the category of property, plant, and equipment. They are listed at their original cost, less any accumulated depreciation. Tangible assets, on the other hand, are also reported on the balance sheet but may be listed under different categories, such as current assets or non-current assets.

Importance

Both fixed assets and tangible assets are important for a company's financial health. Fixed assets are essential for the company's operations and are a key component of its long-term success. Tangible assets, on the other hand, provide liquidity and can be used to generate revenue in the short term.

Risk

Fixed assets are subject to risks such as technological obsolescence, changes in market conditions, and natural disasters. These risks can impact the value of fixed assets and the company's ability to generate income. Tangible assets, on the other hand, are subject to risks such as theft, damage, and changes in market demand.

Conclusion

In conclusion, fixed assets and tangible assets are both important components of a company's balance sheet. While fixed assets are used for long-term operations and are subject to depreciation, tangible assets are physical assets that can be seen and touched. Both types of assets play a crucial role in a company's financial health and success.