Some assets, such as land, may increase in value over time, also known as appreciating in value. If you're entering such an asset into your forecast, it's tempting to want to show it increasing in value in your Balance Sheet each month.
According to Generally Accepted Accounting Principles, however, an asset's value can only be represented as the amount you paid for it. That value stays constant until you re-sell the asset at a higher price. When you've sold it at a higher price, that's when the asset's value has actually increased.
While a valuation may predict a gain in an asset's value over time, LivePlan is structured on the assumption that the only authoritative measure of the increase in market value is the sale price. When you re-sell the asset at a higher price, the gain appears in your financial statements this way:
- On the Balance Sheet as an increase in cash
- On the Cash Flow as an increase in cash
- On the Profit and Loss as "Gain or Loss from Sales of Assets"
Suppose you are entering an asset into your LivePlan forecast and want to represent that it has the potential to increase in value. In that case, you can always add a custom text topic to your plan outline and write about the asset's growth potential there.
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