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Entering asset purchases

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Diane G.

Customarily, long-lasting purchases (called “assets”) are treated differently than regular expenses. Consider two purchases as an example: a company work van and a tank of fuel to power it. The fuel is a short-lived purchase - buy it in January, use it in January. That’s how regular expenses work.

The van is different, though. It’s an expensive purchase, and it won’t be gone at the end of the first month. A good van will deliver value for years to come, so it makes sense to spread out its cost over time. That’s the idea behind asset purchases.

When you enter an asset into your forecast, LivePlan will place its full value in your financial statements and then calculate the amount of value it will lose (through amortization or depreciation) each month over its useful life.

If you plan to get a loan to pay for an asset (as in the company van example), be sure to add that loan separately on the Financing page. All we’re doing here is adding the asset itself.

Note: Not all assets are covered here. Cash, accounts receivable, and inventory are assets too, but we address those separately in our forecast. Just focus here on long-lasting purchases like equipment, vehicles, or furniture. You can also use this feature to spread out the expense of annual contracts or other short-term assets.

 

Adding a long-term asset

A long-term asset is one that continues to provide value for several years (like a company van). For more details, see What is the difference between a long-term asset and a current asset?

  1. Click on the Forecast tab and then Assets:
    forecast_asset_highlight.png
  2. Click Add Asset:
    add_asset_highlighted.png

  3. Enter a name for the asset (or a short description):
    tell_us_about_this_asset.png

  4. Choose how you want to enter the asset. Will you pay a one-time amount for it, pay the same amount per month/year, or pay varying amounts per month/year for it?

    • If you choose One-time amount, enter the expected purchase price and purchase date:
      how_do_you_want_to_enter_asset.png
    • If you choose Constant amount, enter how much you will pay for it (per month or year) and when that payment will begin:
      asset_constant.png
    • If you choose Varying amounts over time enter the amounts you'll pay and which months/years you'll make those payments in:
      varying_amounts_asset.png
  5. Click Next.
  6. Choose Long term for the asset type:
    asset_type.png
  7. Indicate the asset's useful life, which will help LivePlan calculate the depreciation. If this asset won't depreciate, choose Forever (do not depreciate) at the bottom of the list:
    asset_life.png
  8. Finally, if you chose One-time amount on the previous step of the overlay, you'll see an option that asks you to indicate whether you plan to sell this asset during the period covered by your forecast and, if so, when:
    resell_asset.png
    Note: If you don't see this option in your overlay, it means that you chose a constant or varying payment for the asset in the previous step of the overlay.
  9. Click Create Forecast Item. Your long-term asset will appear in the assets table:
    asset_table_asset_highlighted.png

 

Determining the useful life of a long-term asset

For more details on how to choose the useful life of an asset, see Depreciation and Amortization: Determining the useful life of an asset.

 

Adding a current asset

A current asset is one that is used up within 12 months (for example, an annual service contract). For more details, see What is the difference between a long-term asset and a current asset?

  1. Click on the Forecast tab and then Assets:
    forecast_asset_highlight.png
  2. Click Add Asset:
    add_asset_highlighted.png

  3. Enter a name for the asset (or a short description):

    • If you choose One-time amount, enter the expected purchase price and purchase date:
      how_do_you_want_to_enter_asset.png
    • If you choose Constant amount, enter how much you will pay for it (per month or year) and when that payment will begin:
      asset_constant.png
    • If you choose Varying amounts over time, enter how much you will pay for it each month, as well as in the next two fiscal years:
      varying_amounts_asset.png
  4. Click Next.
  5. Click Current to indicate that this is a current asset:
    asset_type_current.png
  6. Select the length of time this current asset will provide value so that LivePlan can amortize that value. If you don't want to amortize it at all, choose the Keep at full value option at the bottom of the list:
    asset_life_current.png
  7. Click Create Forecast Item. Your current asset will appear in the assets table:
    current_asset_highlighted.png

 

Adding special types of assets

These articles offer instructions for entering some special types of assets:

 

Editing or deleting an asset

To edit an asset:

Click on the name of the asset in the table:

asset_list_highlighted.png

Make any desired changes in the overlay that appears, and click Save & Close when you're finished. For details, please take a look at How do I edit or delete forecast entries?

 

To delete an asset:

Click on the three dots next to the name of the asset that you wish to delete on the asset in the table:

asset_item_menu.png

 

Select Delete from the drop-down menu:
asset_delete_menu.png
Click Delete:

delete_forecast_item_confirm.png

 

Where does this entry appear in the financial statements?

Assets can be entered as Current Assets or Long-term Assets, and these two entries appear in different parts of the financials. In the Profit and Loss statement, only the depreciation and amortization of an asset will be listed, as this is the only part of the asset that's considered an expense of daily operations. 

The amortization of a current asset will appear under Operating Expenses in the Profit & Loss, as shown below:

P_L_amortization_current_assets_highlighted.png

The depreciation of a long-term asset will appear in the P&L under Depreciation & Amortization, as shown below:

depreciation_highlighted.png

In the Balance Sheet, a current asset will appear as "Other Current Assets," with its value decreasing month to month as the asset is amortized:

balance_sheet_other_current_assets.png

A long-term asset appears in the Balance Sheet as shown below. You can see the value of the asset and the depreciation on separate lines:

balance_sheet_long_term_assets.png

In the Cash Flow statement, both short-term and long-term assets appear as shown below. The value of the asset purchase appears as a negative cash flow, and the Depreciation & Amortization appears as a positive cash flow. This doesn't mean depreciation is a source of income. Instead, the positive depreciation amounts are adjustments to the cash value of the asset:

cash_flow_asset_impact.png

If an asset is forecasted to be resold, a Gain or Loss from Sale of Assets line will also appear on the Cash Flow statement under Net Cash From Operations. The gain or loss on the sale of an asset is the difference between the amount of cash that your company receives and the asset's book value at the time of the sale. If an asset is set to a depreciation schedule and is sold for an amount over or under the linearly depreciated asset value, then that gain or loss will be shown here in the month and year in which it occurs.
gain_or_loss_from_sale_of_assets.png

 

More on forecasting:

Preparing a forecast

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