Tangible assets

Definition

Tangible assets are physical items of value owned by a business, such as machinery, buildings, and inventory. They are recorded on the balance sheet and can be used to generate revenue.

5 Must Know Facts For Your Next Test

1. Tangible assets appear under 'Non-Current Assets' or 'Fixed Assets' on the balance sheet.
2. Depreciation is applied to tangible assets to allocate their cost over their useful life.
3. Tangible assets usually have a residual value at the end of their useful life.
4. Acquisition cost, installation fees, and transportation costs are all part of the initial valuation of tangible assets.
5. Tangible assets can be sold or leased to generate cash flow for a business.

Review Questions

• Where do tangible assets appear on the balance sheet?
• How is depreciation related to tangible assets?
• What costs are included in the initial valuation of a tangible asset?

Related terms

Intangible Assets:

Non-physical items of value such as patents, trademarks, and goodwill.

Depreciation:

The process of allocating the cost of a tangible asset over its useful life.

Residual Value:

The estimated amount that an entity would currently obtain from disposal of an asset after deducting estimated disposal costs.