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Tangible assets are property owned by a business that can be touched -- they physically exist.  Examples include furniture and fixtures, computer hardware, delivery equipment, leasehold improvements and inventory.

Tangible assets are what a company uses to operate the business.  People sit at desks and use computers to process work.  Machinery is used to make the products that are delivered by the delivery equipment.  Inventory is on the shelves to sell to customers.  Raw material inventory is used to produce finished goods. 

Tangible assets are first listed on the balance sheet, but they don’t remain there for the life of the business.  Eventually they find their way into the income statement. This happens in two different ways and depends on the type of tangible asset.   

Inventory-types of tangible assets, when used, become part of the cost of goods sold. These assets include raw materials used for the production of products.

Fixed assets are the other types of tangible asset.  These are assets with a useful life of more than one accounting period.  They make their way to the income statement through depreciation.  Depreciation is a process of expensing the cost of the asset over its useful life.  It is a way of reflecting the wear and tear on the tangible assets as they are used to operate the business. Depreciating tangible assets include computers, office furniture, trucks and buildings.

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