Fixed assets — Excel guide
Buy something that lasts years and the cost follows it: capitalize, depreciate, and eventually test whether it's still worth its book value.
Capitalize vs expense
Long-lived purchases become ASSETS and depreciate over their life (CapEx); everything else hits expenses now (OpEx). Companies set a capitalization threshold (say $2,500) below which even durable purchases are expensed — a materiality policy.
Depreciation methods at a glance
All methods write off the same total (cost − salvage); they differ in timing. See the Depreciation cheat sheet for the Excel functions.
| Method | Shape |
|---|---|
| Straight-line | Even every year |
| Double-declining | Big early, shrinking |
| Sum-of-years' digits | Front-loaded, linear decline |
| Units of production | Tracks usage, not time |
Book value & impairment
Book value = cost − accumulated depreciation (a contra-asset). If events say the asset can't recover its book value, an impairment writes it down — goodwill gets this test annually, and impairments don't reverse under US GAAP.
Depreciation vs amortization
Same idea, different asset class: tangible assets depreciate, finite-lived intangibles (patents, licenses) amortize. Land does neither.