Assets Investment Section

In this section, we configure parameters related to investing in fixed assets of the business.

The parameters to be configured include:

1. Asset purchase: Name of the fixed asset to be purchased. For example, machinery, equipment, vehicles, factories, offices, etc. For a coffee shop, potential assets could include a coffee machine, tables and chairs, refrigerators, air conditioners, etc. For a SaaS company, possible assets might include computers, printers, servers, etc.

2. Asset Cost: Value of the fixed asset. This is the purchase price of the fixed asset.

   Example: If the business wants to buy a coffee machine for $10,000, then the asset value will be $10,000.

3. Quantity: Number of fixed assets to be purchased. This refers to the number of items of the fixed asset to be purchased, such as the number of coffee machines, tables and chairs, computers, etc.

4. Purchase month: The month in which the fixed asset is purchased. This is the month the business acquires the fixed asset.

5. Residual value: The remaining value of the fixed asset. This is the value that the business can expect to receive from selling the fixed asset after its use.

6. Useful Lifetime: The lifetime of the fixed asset in months. This is the number of months the fixed asset is expected to be in use. For example, if the lifetime of the coffee machine is 60 months, then the Useful Lifetime value will be 60.

The formula used to calculate the monthly depreciation of the fixed asset is:

Depreciation = (Asset Cost - Residual Value) * Quantity / Useful Lifetime.

Example, Product name: Coffee Machine.

Asset Cost = $10,000.

Quantity = 2.

Residual Value = $1,000.

Useful Lifetime = 60 months.

Therefore, Depreciation = (Asset Cost - Residual Value) * Quantity / Useful Lifetime = ($10,000 - $1,000) * 2 / 60 = $300.

This calculation helps businesses to understand the monthly cost associated with the depreciation of their fixed assets, which is crucial for financial planning and reporting. By accounting for the depreciation of assets, businesses can more accurately reflect the value of their assets over time and plan for future investments.