This component allows you to model purchasing valuable items for the business. You can choose to depreciate its value over time and sell it at a later date if you choose.
Setting up a purchase
To set up a new asset purchase you must first enter the price paid for this asset. If you wish to apply Tax to this asset purchase then turn on tax at the bottom of the component.
You can purchase more of this asset over time by changing to a table:
If the business owned this asset before the start date of this plan then switch this toggle on:
Setting the asset to be acquired before the start of the plan will apply the current value of the asset to your opening balance.
Some assets, like computers, cars and appliances, tend to lose value over time. This process is called depreciation. Depreciation can be entered here as a percentage of the initial value of the asset, a % of the latest value (a curve with reducing depreciation), straight line depreciation (depreciation to 0 over the duration of the Asset on the Timeline) or manual depreciation.
To enter different depreciation rates, click the Enter in table button.
Selling your asset
By default, this asset will not be sold. Switching this toggle will enable you to sell this asset or write it off. "Sell at depreciated value" will set the asset at its starting value minus any depreciation.Sell at custom value" allows you to enter the amount of cash you receive from selling the asset. "Write off" will remove the asset from your balance sheet, but you won't get any money from it.
The difference between an operational cost and an asset cost
Both the operational cost and asset components can be used to make purchases for the business. They will both have cost amounts that you enter, so what is the difference?
An operational cost can be set up as a one-off or regular cost, you'll see this cost appear on your cash flow and profit & loss reports. An asset can only be set up as a one-off cost. Again, you'll see this appear on your cash flow and profit & loss reports but you will also see the value added to your balance sheet representing it's worth to your business.
The easiest way to describe the difference is an example. Let's say you buy a van for your business. You would use an asset component to represent this purchase, putting both the cost and value on your reports because a van is worth something to you and could be sold at a later date if you wanted to. You could then use an operational cost component to cover the petrol costs of your van, entering in a regular amount each period. This would put a regular cost on your reports which is all you need to model petrol.