---
title: Fixed Assets, Depreciation Expense, and Accumulated Depreciation
description:  
---

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# Fixed Assets, Depreciation Expense, and Accumulated Depreciation

## PlanGuru makes it easy to forecast capital expenditures, depreciation expense, and accumulated depreciation in a way that keeps your Balance Sheet, Income Statement, and Cash Flow perfectly aligned.

 

Accounts added to the **Property & Equipment** section can be defined as one of two account types:

| Account Type | Purpose |
| --- | --- |
| 🟢 **Asset** | Used to forecast **capital expenditures (CapEx)** and additions to fixed assets |
| 🔵 **Accumulated Depreciation** | Used to forecast the **reduction in asset value** over time |

By linking these with a **Depreciation Expense** account on the **Income Statement**, PlanGuru automatically handles the full depreciation cycle.

---

### When to Use This Setup

Use this configuration when you want to:

- Forecast **capital additions** (e.g., equipment purchases, leasehold improvements, vehicles, software).
- Calculate **monthly depreciation expense** based on asset values.
- Track the **accumulated depreciation balance** automatically.
- Keep your **cash flow and net asset values** up to date in your forecasts.

---

### Step-by-Step Setup

#### **Step 1 – Add a Fixed Asset Account**

1. Go to the **Balance Sheet → Property & Equipment** section.
2. Right-click and select **Add Account**.
3. Name the account (e.g., *Fixed Asset – Equipment*).
4. Keep the **Account Type** set to **Asset**.
5. Enter a capital addition — for example, **$100,000** in March.

![Fixed Asset](https://help.planguru.com/hs-fs/hubfs/Fixed%20Asset.png?width=670&height=367&name=Fixed%20Asset.png)

---

#### **Step 2 – Add an Accumulated Depreciation Account**

1. Right-click again in the same section and select **Add Account**.
2. Name it (e.g., *Accumulated Depreciation – Equipment*).
3. Change the **Account Type** to **Accumulated Depreciation**.

![AD Account](https://help.planguru.com/hs-fs/hubfs/AD%20Account.png?width=670&height=156&name=AD%20Account.png)

---

#### **Step 3 – Add a Depreciation Expense Account**

1. Navigate to the **Income Statement**.
2. Right-click and select **Add Account**.
3. Name it (e.g., *Depreciation Expense – Equipment*).
4. Change the **Account Type** to **Depreciation Expense**.
5. Link this account to the **corresponding Accumulated Depreciation** account on the Balance Sheet.

![Linked AD](https://help.planguru.com/hs-fs/hubfs/Linked%20AD.png?width=670&height=288&name=Linked%20AD.png)

> 💡 **Tip:**  
> If you have multiple asset categories (e.g., furniture, vehicles, software), create **separate Depreciation Expense** and **Accumulated Depreciation** accounts for each.  
> Even if these don’t exist in your accounting system, adding them in PlanGuru improves visibility and reporting accuracy.

---

#### **Step 4 – Forecast Depreciation Expense**

Use the **Percent of Other Account** projection method for the Depreciation Expense account:

1. Double-click or right-click → **Edit** the Depreciation Expense line.
2. Select **% of Other Account**.
3. Link it to the **Fixed Asset** account.
4. Enter the appropriate depreciation rate (e.g., **4.16% per month** for a 2-year useful life).

![416](https://help.planguru.com/hs-fs/hubfs/416.png?width=670&height=418&name=416.png)

**Formula Example:**

> 100% ÷ 24 months = **4.16% per month**

After 24 months, revert the percentage to **0%** to stop depreciation once the asset is fully written down.

---

#### **Step 5 – Review the Results**

After applying the method:

- The **Depreciation Expense** will calculate monthly based on the asset’s value and defined percentage.
- The **Accumulated Depreciation** balance will automatically increase as expenses are recorded.
- The **Net Book Value** (Asset minus Accumulated Depreciation) will adjust accordingly.

**Income Statement:**

![AD IS](https://help.planguru.com/hs-fs/hubfs/AD%20IS.png?width=670&height=42&name=AD%20IS.png)

**Balance Sheet: **

![AD BS](https://help.planguru.com/hs-fs/hubfs/AD%20BS.png?width=670&height=36&name=AD%20BS.png)

---

### Linking Cash Flow

Because PlanGuru automatically connects these accounts:

- **Asset additions** decrease cash (CapEx outflow).
- **Depreciation expense** does *not* affect cash (non-cash expense).
- The **Cash Flow Statement** correctly categorizes additions under *Investing Activities* and depreciation under *Operating Activities (adjustment to net income)*.

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