Fixed Assets also know as property, plant, and equipment (PP&E), are assets and property which cannot easily be converted into cash. This can be compared with current assets such as cash or bank accounts, which are described as liquid assets. In most cases, only tangible assets are referred to as fixed.
Fixed Assets normally includes items such as buildings, motor vehicles, furniture, office equipment, computers, fixtures and fittings, and plant and machinery.
For Fixed Assets purchases you should spend less than 5% of your time estimating depreciation expense and virtually all your time estimating exactly how much fixed assets you will be purchasing each month. Depreciation Expense has no effect on cash, it is merely an accounting entry used to decrease the equipments book value. What is really important is cash. Cash is decreased when you make an Fixed Asset purchase and not when an asset is depreciated.
The following two items are used to estimate depreciation:
- Average Life (years), and
- Average Salvage Value of (as % of purchase price).
Do the best you can quickly estimating these amounts and then spend the rest of your time forecasting your Fixed Asset purchases.
Average Life (years)
Enter a Weighted Average life of your company's depreciable assets.
This is just an estimate you should NOT need a calculator for this.
An example of an estimated weighted average is as follows: Assume a Company has the following depreciable assets
| Asset | Cost | Life (years) |
| Truck | $25,000 | 7 |
| Computer | $3,300 | 3 |
Do not simply take the average years which is (7+3)/2 or 5 years. Apply a heaver emphasis on the or the more expensive assets (i.e. the truck), so use 6 years for the Average Life.
Average Salvage Value of (as % of purchase price)
Enter a Weighted Average Salvage Value Percentage of your company's depreciable assets.
This is just an estimate you should NOT need a calculator for this.
An example, assume a Company has the following depreciable assets:
| Asset | Cost | Salvage
Value
Amount | Salvage
Value
Percent |
| Truck | $25,000 | $4,000 | 16% |
| Computer | $3,300 | $300 | 9% |
Do not simply take the average salvage value percentage which is (16%+9%)/2 or 12.5 percent. Apply a heaver emphasis on the more expensive items (i.e. the truck), so rather than using 12.5%, use 15%.
Beginning Balance
The beginning balance is taken from the amount that was entered on the beginning balance sheet.
If you want to change the amount go the Beginning Balance Sheet page.