4 posts tagged with "Assets"

If you track fixed assets in your accounting—laptops, cameras, machinery, or even office furniture—your books need to reflect their declining value. This involves two key concepts: depreciation (the expense) and its running total, accumulated depreciation. This guide explains both in plain language and then shows you exactly how to model them in Beancount with copy-pasteable examples, including powerful automation options.

What is accumulated depreciation?​

Accumulated depreciation is the total amount of depreciation that has been recorded against an asset since the day it was put into service. Think of it as a running tally. It’s not a new kind of expense—it's just the to-date sum of all past depreciation charges for that asset.

In financial statements, you’ll see accumulated depreciation paired with the asset’s original price. This allows anyone reading your books to see both the historical cost (what you paid for it) and the net book value (what it's currently worth on your books).

A crucial detail is that accumulated depreciation is a contra-asset account. This might sound complex, but it's a simple idea:

• It's an "asset" account, so it lives in the Assets section of your chart of accounts.
• However, it carries a credit balance (a negative value in Beancount's asset accounts), which reduces the value of the related fixed asset.

Where does it appear on the balance sheet?​

Accumulated depreciation typically appears on the balance sheet directly underneath the fixed asset it relates to. For example:

Many financial statements simplify this by showing a single line item like “Property, plant & equipment, net”. This single number represents the total historical cost of all assets minus their total accumulated depreciation, giving you the final net book value.

How do you calculate depreciation?​

There are several methods for calculating depreciation. The one you choose determines how much expense you record each period, which in turn adds to the accumulated depreciation total. Two common families of methods are:

• Straight-Line (SL): This is the simplest and most common method for bookkeeping purposes. You expense an equal amount of the asset's value in each period of its useful life. For example, a $3,000 laptop with a 36-month (3-year) useful life would be depreciated at $83.33 per month.
• Tax Methods (e.g., MACRS in the U.S.): For tax purposes, governments often define specific accelerated schedules. In the U.S., the Modified Accelerated Cost Recovery System (MACRS) allows you to take larger depreciation deductions in the earlier years of an asset's life. Beancount can easily handle these schedules—you just need to calculate the amounts according to the official tables (like those in IRS Publication 946) and generate the corresponding journal entries.

Formula (Straight-Line)

Periodic Depreciation = $\\frac{\\text{Cost} - \\text{Salvage Value}}{\\text{Useful Life}}$

Accumulated Depreciation (at date t) = $\\sum (\\text{Periodic Depreciation up to } t)$

Salvage value is the estimated residual value of an asset at the end of its useful life. For simplicity, it's often assumed to be zero.

The Beancount Way: Model Cost and Accumulated Depreciation​

To properly track fixed assets in Beancount while preserving their original cost, you’ll use a pair of asset accounts for each category, plus an expense account.

• Assets:Equipment:Computers:Cost (to hold the historical cost)
• Assets:Equipment:Computers:AccumDep (the contra-asset, which will be credited over time)
• Expenses:Depreciation:Computers (to record the periodic expense)

This structure mirrors standard accounting practice and is the recommended approach for managing fixed-asset depreciation in Beancount.

Option A: Manual Straight-Line Entries​

This is the most direct method. You control every entry, which is great for understanding the mechanics.

1. Open the necessary accounts

2025-01-01 open Assets:Bank:Checking
2025-01-01 open Assets:Equipment:Computers:Cost
2025-01-01 open Assets:Equipment:Computers:AccumDep
2025-01-01 open Expenses:Depreciation:Computers

2. Record the purchase (at historical cost)

When you buy the asset, you debit the Cost account.

2025-01-20 * "Purchase MacBook Pro"
  Assets:Equipment:Computers:Cost      3000.00 USD
  Assets:Bank:Checking               -3000.00 USD

3. Record monthly depreciation

Each month, you'll record the depreciation expense. For a $3,000 asset over 36 months, the monthly depreciation is $3000 \div 36 = $83.33$.

The transaction involves debiting the expense account and crediting the contra-asset account.

2025-02-28 * "Monthly depreciation - MacBook Pro (SL 36mo)"
  Expenses:Depreciation:Computers           83.33 USD
  Assets:Equipment:Computers:AccumDep      -83.33 USD  ; This is the credit to the contra-asset

You would repeat this entry every month for 36 months. The balance in Assets:Equipment:Computers:AccumDep will grow more negative over time, reducing the asset's net book value.

Quick Check: You can easily check the net book value in Fava's Balance Sheet or by running a quick query:

bean-query myledger.bean "SELECT account, SUM(position) WHERE account ~ 'Assets:Equipment:Computers:(Cost|AccumDep)' GROUP BY account"

The sum of the balances of these two accounts is your net book value.

Option B: Automate with Fava’s amortize Plugin​

If you use Fava (the popular web interface for Beancount) and your depreciation is a fixed amount each month, you can automate it.

First, enable the plugin at the top of your Beancount file:

plugin "fava.plugins.amortize_over"

Next, create a single transaction that defines the entire depreciation schedule.

; 1. Record the initial purchase as usual
2025-01-20 * "Purchase MacBook Pro"
  Assets:Equipment:Computers:Cost      3000.00 USD
  Assets:Bank:Checking               -3000.00 USD

; 2. Set up the depreciation schedule
2025-01-20 * "Depreciation schedule - MacBook Pro"
  amortize_months: 36
  Expenses:Depreciation:Computers       3000.00 USD
  Assets:Equipment:Computers:AccumDep  -3000.00 USD

The plugin will see this transaction and automatically generate virtual postings for $83.33 each month for 36 months. These entries don't get written to your .bean file but appear in all reports. This is perfect for straight-line depreciation but won't work for irregular schedules like MACRS.

Option C: Generate Periodic Entries with a Third-Party Plugin​

If you prefer to have real, non-virtual transactions written into your files but still want automation, a periodic entry generator is a great choice. One of the most popular is beancount-periodic by Dallas Lu. This plugin can be configured to create dated postings on your behalf, giving you the control of manual entries with the convenience of automation.

Viewing Results: Cost, Accumulated Depreciation, and Net Book Value​

No matter which method you choose, your Balance Sheet will show both the Cost and AccumDep accounts under your Assets. The sum of these two is your net book value. This presentation—showing the gross cost less the accumulated depreciation—is exactly what accountants and financial analysts expect to see. It provides full transparency into the age and value of your assets.

Disposing of an Asset (Sell, Scrap, or Retire)​

When an asset reaches the end of its life, you either sell it, scrap it, or retire it. To remove it from your books, you must:

1. Remove its historical cost.
2. Remove its associated accumulated depreciation.
3. Record any cash received.
4. Record any resulting gain or loss (the difference between cash received and the net book value).

Example: Selling an Asset for a Gain

Let's say you sell the MacBook Pro on June 15, 2027.

• Original Cost: $3,000
• Accumulated Depreciation at time of sale: -$2,500
• Net Book Value: $3,000 - $2,500 = $500
• You sell it for: $800
• Gain on Sale: $800 (proceeds) - $500 (net book value) = $300

Here is the Beancount transaction to record the disposal:

2027-06-15 * "Sell MacBook Pro"
  Assets:Bank:Checking                     800.00 USD  ; Cash received
  Assets:Equipment:Computers:AccumDep     2500.00 USD  ; Debit to zero out the contra-asset
  Assets:Equipment:Computers:Cost        -3000.00 USD  ; Credit to remove the original cost
  Income:Gains:AssetDisposals             -300.00 USD  ; Credit to record the gain

If the proceeds had been only $400 (a loss of $100), you would post the difference to an Expenses:Losses:AssetDisposals account with a positive amount (a debit).

FAQ (Fast)​

• Is accumulated depreciation an asset or a liability? Neither. It’s a contra-asset. It's located in the assets section of your balance sheet but has a credit balance, which reduces the total asset value.

• Do I ever post directly to the Cost account after purchase? Generally, no. The purpose of the contra-asset account is to preserve the original historical cost. All reductions in value due to depreciation should be posted to ...:AccumDep.

• Can I use Beancount for MACRS (tax) schedules? Yes. You'll need to calculate the depreciation amounts for each period using the tables in IRS Publication 946. Then, you can record those amounts using manual entries or a periodic plugin. The Fava amortize plugin is not suitable for this, as MACRS amounts are not equal each month.

• What about Section 179 expensing? Section 179 allows you to expense the full cost of qualifying property in the year you place it in service, instead of depreciating it over time. This is an election you make for tax purposes. In Beancount, this would simply be a debit to an expense account instead of a fixed asset account at the time of purchase.

Common Pitfalls (and How to Avoid Them)​

• Posting depreciation directly against the Cost account.
  • Fix: Always credit the ...:AccumDep contra-asset account. This preserves the historical cost, which is important for financial reporting.
• Forgetting to remove Accumulated Depreciation on disposal.
  • Fix: When you sell or scrap an asset, your journal entry must include a debit to ...:AccumDep to clear its balance for that asset.
• Mixing up bookkeeping and tax depreciation schedules.
  • Fix: Your internal management books often use straight-line for simplicity, while your tax filings may require MACRS. Keep these purposes separate and document your policy.
• Expecting the Fava amortize plugin to handle non-equal schedules.
  • Fix: Remember that this plugin is designed only for equal monthly splits. For any other pattern, use manual postings or a more flexible periodic plugin.

Copy-Paste Template​

Here is a complete template you can adapt for your own ledger.

option "title" "My Business Ledger"
plugin "fava.plugins.amortize_over"  ; Remove if not using Fava automation

; --- Accounts ---
2025-01-01 open Assets:Bank:Checking
2025-01-01 open Assets:Equipment:Computers:Cost
2025-01-01 open Assets:Equipment:Computers:AccumDep
2025-01-01 open Expenses:Depreciation:Computers
2025-01-01 open Income:Gains:AssetDisposals
2025-01-01 open Expenses:Losses:AssetDisposals

; --- Purchase at historical cost ---
2025-01-20 * "Purchase MacBook Pro"
  Assets:Equipment:Computers:Cost      3000.00 USD
  Assets:Bank:Checking               -3000.00 USD

; --- Choose ONE depreciation approach ---

; (A) Manual monthly posting
2025-02-28 * "Monthly depreciation - MacBook Pro (SL 36mo)"
  Expenses:Depreciation:Computers           83.33 USD
  Assets:Equipment:Computers:AccumDep      -83.33 USD

; (B) Fava automation (for 36 equal monthly splits)
2025-01-20 * "Depreciation schedule - MacBook Pro"
  amortize_months: 36
  Expenses:Depreciation:Computers       3000.00 USD
  Assets:Equipment:Computers:AccumDep  -3000.00 USD

; --- Sale example (edit numbers for your actual sale) ---
2027-06-15 * "Sell MacBook Pro"
  Assets:Bank:Checking                     800.00 USD
  Assets:Equipment:Computers:AccumDep     2500.00 USD
  Assets:Equipment:Computers:Cost        -3000.00 USD
  Income:Gains:AssetDisposals             -300.00 USD

TL;DR​

• Keep asset Cost and AccumDep in separate accounts to preserve historical cost.
• Record depreciation with a debit to Expenses:Depreciation:... and a credit to Assets:...:AccumDep.
• Automate equal monthly depreciation with the Fava amortize plugin or generate dated entries with a periodic plugin.
• When disposing of an asset, you must remove both its Cost and its AccumDep from the books and record the resulting gain or loss.

Sources & Further Reading​

• Beancount.io "Amortization" Guide (Contra-asset approach, Fava plugin, examples).
• Investopedia on Depreciation vs. Accumulated Depreciation (Credit balance rationale).
• IRS Publication 946 (Official rules for MACRS and U.S. tax depreciation).
• beancount-periodic Plugin (Tool for generating periodic transactions).

Real estate transactions may constitute the largest financial activity in a family's lifetime. This article explains how to model real estate in Beancount. I treat real estate as an asset and the appreciation of the house as unrealized gain. Additionally, the mortgage is modeled as a liability, and the interest is considered an expense.

Let's assume that Mr. A purchased a luxury home located at 123 ABC Street, XYZ City, CA, 12345 on January 1, 2020, for a price of 1 million. The interest rate is 3.0%, the down payment is 20%, and the loan amount is 800,000.

Create Accounts​

Firstly, we treat the house as an Asset. Since the house is being listed as an Asset, it needs to be given a unit. In this case, the unit quantity is only one, it's unlikely there will be multiple, and even if it's the nth house, we would want to record it in a separate Asset. That is to say, one house corresponds to one Asset, and this Asset has a special unit, its value can only possibly be 1.

2019-12-31 commodity HOUSE.ABC
  name: "123 ABC Street, XYZ City, CA, 12345"

2019-12-31 open Assets:Property:US:CA:123ABC                        HOUSE.ABC
2019-12-31 open Liabilities:Bank:US:SomeBank:Mortgage:Loan          USD

In the first line here, we defined a commodity unit representing the house. In the fourth line, we defined an Asset account, which holds the commodity unit previously defined as the house. In the fifth line, we defined an account for the lending bank. As it's a liability, it falls under the Liabilities category.

Purchase​

With the accounts set up as above, the act of buying a house is equivalent to

borrowing money (debt) + spending money (down payment) = 1 house in asset

The most important reference when buying a property is likely the Buyer’s Settlement Statement, which clearly outlines the flow of money.

2020-01-01 * "Buying the house"
    Assets:Property:US:CA:123ABC                  1 HOUSE.ABC {1,000,000 USD}
    Assets:Bank:US:SomeBankA                      -100,000 USD
    Assets:Bank:US:SomeBankB                      -101,000 USD
    Liabilities:Bank:US:SomeBank:Mortgage:Loan    -800,000.00 USD
    Expenses:Home:Insurance                       1,000 USD
    Expenses:Home:Mortgage:Loan:ClosingCost

Here, we're detailing the transaction of buying the house, where money flows out from some banks (used for down payment and other expenses), a loan is taken (adding to liabilities), and a house is gained (added to assets).

Pay back mortgages​

Based on the above purchase record, we currently owe 800,000 USD. Due to the interest, and considering that all loans in the US are amortized equally in terms of principal and interest, the monthly payment includes a portion for interest and a portion for principal. In the early stages, the interest constitutes the majority.

To record the loan repayment, all you need to do is check your loan bank's statement. You just need to know how much of the principal you are repaying each month, and the rest is interest. The interest is counted as an Expense.

2020-02-01 * "Mortgage payment"
    Assets:Bank:US:SomeBank:Saving:Joint              -3,372.83 USD
    Liabilities:Bank:US:SomeBank:Mortgage:Loan         1,376.26 USD
    Expenses:Home:Mortgage:Loan:Interest

This entry details the monthly mortgage payment which is subtracted from your joint savings account. The repayment of principal reduces the liability, while the interest part is treated as an expense.

Appreciation​

If you want to record the appreciation of the property, some people create a separate account[, only recording the appreciation of the current property. Considering that the value of the house may increase or decrease, this appreciation may be negative. The advantage of this is that in the summary of your total assets, these two accounts will be included, one for the value of the house at the time of the transaction, and the other for the current appreciation of the house, thus reflecting the real-time price of the house.

I did not adopt this method, mainly for the following reasons:

1. The current value of the house can only be an estimate, for reference only, without practical value. Usually, I can only get the evaluation of the property on websites like Redfin or Zillow, and I personally don't think it has high reference value. I also did not consider incorporating these appreciations into total assets in real time.
2. Personally, I think before the mortgage is paid off, if the cash flow of the house is negative, to some extent, the property is still a liability. Therefore, incorporating it into assets prematurely will give you an illusion of enriched assets and appreciation, and I personally want to avoid this illusion.

The method I use to record property appreciation, which will also be discussed later on how to model RSUs. This method is to use a virtual currency unit. Assuming your base currency is USD, we can use USD.UNVEST (it seems that there is no need to create a new Commodity for this) to indicate that this asset is calculated in a special currency. The growth or reduction of this asset will not be recorded in USD. This way, I can achieve my original goal, that is, to record the appreciation of the house, and this appreciation will not be included in the final balance sheet (Balance Sheet).

2020-01-01 price HOUSE.ABC                          1,000,000 USD
2025-01-01 price HOUSE.ABC                          1,400,000 USD.UNVEST

You only need to price your property to USD.UNVEST regularly.

So, on Fava's Commodity page, you can track the trend of the reference price of the house. But on the Balance Sheet page, the price of the house is still the price of the house at the time of the transaction. That is to say, your total assets are still your down payment money at that time, plus the principal you keep paying off. The final change of this asset should only occur when you buy a house.

Sell​

Because no property has been sold yet and the various miscellaneous fees in the middle are unclear, this is a hypothetical scenario.

Suppose, on January 1, 2025, the property has appreciated to $1,400,000, and some reference data are as follows:

Person A decides to sell the property, and the final selling price of the house is $1,300,000.

2025-01-01 * "Selling the house"
    Assets:Property:US:CA:123ABC                  -1 HOUSE.ABC {1,300,000 USD}
    Liabilities:Bank:US:SomeBank:Mortgage:Loan    709,656.20 USD
    Expenses:Home:Agent:Fee                       72,000 USD
    Expenses:Home:ClosingCost                     10,000 USD
    Expenses:Home:Tax                             90,000 USD
    Assets:Bank:US:SomeBankA

Here it is assumed that 2 out of 5 years are self-occupied, so the appreciation of 500,000 does not need to be taxed. I randomly calculated a number here. In the end, the money that enters Person A's account is $418,343.8, of which 200,000 is the down payment at that time, and about 100,000 in interest has been paid. So, in the end, the book profit for Person A is around 100,000. It is worth noting that my calculation is not fair, after all, Person A has saved rent for these 5 years, and there may be other expenses on the house, such as maintenance, decoration, and so on.

To reflect this in the balance sheet, you can add this pricing.

2025-01-01 price HOUSE.ABC                          1,300,000 USD

Amortization spreads out payments to many installments over time. In beancount.io, you can use the plugin fava.plugins.amortize_over to achieve so.

Without amortization, if you want to insure your car for 6 months with costs of $600. You have to record this as a one-time expense for a particular date.

2017-06-01 open Assets:Bank:Checking
2017-06-01 open Assets:Prepaid-Expenses
2017-06-01 open Expenses:Insurance:Auto


2017-06-01 * "Pay car insurance"
    Assets:Bank:Checking       -600.00 USD
    Assets:Prepaid-Expenses

However, with amortization, you could allocate the expense over six months by putting plugin "fava.plugins.amortize_over" to the top of the file and using amortize_months: 6 for the transaction

plugin "fava.plugins.amortize_over"

2020-06-01 open Assets:Bank:Checking
2020-06-01 open Assets:Prepaid-Expenses
2020-06-01 open Expenses:Insurance:Auto

2020-06-01 * "Amortize car insurance over six months"
    amortize_months: 6
    Assets:Prepaid-Expenses       -600.00 USD
    Expenses:Insurance:Auto

And then in Journal, you will see the transaction is split into 6 postings.

2020-11-01 * Amortize car insurance over six months (6/6) am
2020-10-01 * Amortize car insurance over six months (5/6) am
2020-09-01 * Amortize car insurance over six months (4/6) am
2020-08-01 * Amortize car insurance over six months (3/6) am
2020-07-01 * Amortize car insurance over six months (2/6) am
2020-06-01 * Amortize car insurance over six months (1/6) am

Why Modern Bookkeeping Matters​

Still managing your investments with spreadsheets? While spreadsheets are versatile, they can become cumbersome and error-prone as your investment portfolio grows. Enter Beancount.io – a sophisticated yet user-friendly investment tracking platform designed specifically for managing stock and cryptocurrency portfolios. Built with engineers and financial minimalists in mind, Beancount.io combines powerful features with an intuitive interface to streamline your investment tracking experience.

Double-entry Bookkeeping: The Foundation of Accuracy​

Beancount.io is built on the principles of double-entry accounting – a time-tested methodology used by financial institutions worldwide. This system ensures mathematical accuracy through a simple yet powerful concept: every financial transaction must balance perfectly.

In double-entry bookkeeping, each transaction requires at least two entries – a debit (+) and a credit (-) – across different accounts. This built-in verification system makes it virtually impossible to record unbalanced transactions, ensuring your financial records remain accurate and reliable.

1970-01-01 open Income:BeancountCorp
1970-01-01 open Assets:Cash
1970-01-01 open Expenses:Food
1970-01-01 open Assets:Receivables:Alice
1970-01-01 open Assets:Receivables:Bob
1970-01-01 open Assets:Receivables:Charlie
1970-01-01 open Liabilities:CreditCard

2019-05-31 * "BeancountCorp" "Salary of May 15th to May 31st"
  Income:BeancountCorp               -888 USD
  Assets:Cash                         888 USD

2019-07-12 * "Popeyes chicken sandwiches" "dinner with Alice, Bob, and Charlie"
  Expenses:Food 20 USD
  Assets:Receivables:Alice 20 USD
  Assets:Receivables:Bob 20 USD
  Assets:Receivables:Charlie 20 USD
  Liabilities:CreditCard -80 USD

As you can see in the two examples above, every transaction must fulfill the accounting equation.

Assets = Liabilities + Equity(aka Net Assets)

We used the Beancount syntax by Martin Blais and the web project Fava by Jakob Schnitzer to build this website. And it will alert you if any transaction has any legs not summing to zero.

Now you understand how we enforce the correctness of the ledger. But you may ask what are those "accounts"?

Understanding Accounts: The Water Bucket Analogy​

Think of your financial accounts as a system of interconnected water buckets, where money flows like water between them. This analogy makes double-entry bookkeeping intuitive: when you transfer money from one account to another, it's like pouring water from one bucket to another – the total amount of water (money) in the system remains constant.

Beancount.io introduces five kinds of accounts.

1. Income — Its amount is always negative or in debit. This is because you are making money, and then the money is debiting from "Income" account and crediting to your "Assets."
2. Expenses — Its amount is always positive or in credit. This is because you are spending money, and the money is flowing from the "Assets" or "Liabilities" to the "Expenses."
3. Liabilities — Its amount is positive or zero. Your credit card liabilities are a good example, which rises and falls in cycles.
4. Assets — Its amount is positive or zero. Your cash or houses are always worth some prices.
5. Equity — Your net assets. The system will calculate automatically for you. Equity = Assets - Liabilities and it reflects how wealthy you are.

Now you can open your customized accounts with those keywords above:

1970-01-01 open Assets:Cash
1970-01-01 open Assets:Stock:Robinhood
1970-01-01 open Assets:Crypto:Coinbase
1970-01-01 open Expenses:Transportation:Taxi
1970-01-01 open Equity:OpeningBalance

Advanced Investment Tracking with Commodities​

Beancount.io excels at tracking diverse investments, from stocks to cryptocurrencies. Let's explore how it handles complex investment scenarios. For example, here's how you would record purchasing 10 Bitcoins at $100 each in 2014:

2014-08-08 * "Buy 10 Bitcoin"
  Assets:Trade:Cash -1000.00 USD
  Assets:Trade:Positions  10 BTC {100.00 USD}

And then three years later, you sell them (originally with costs of $100 per unit annotated with {100.00 USD}) at the price of $10,000 per unit annotated with @ 10,000.00 USD.

2017-12-12 * "Sell 2 Bitcoin"
  Assets:Trade:Positions                   -2 BTC {100.00 USD} @ 10,000.00 USD
  Assets:Trade:Cash                          20,000.00 USD
  Income:Trade:PnL                          -19,800.00 USD

Or the same transaction with @@ 20,000.00 USD means that at the price of $20,000 in total.

2017-12-12 * "Sell 2 Bitcoin"
  Assets:Trade:Positions                   -2 BTC {100.00 USD} @@ 20,000.00 USD
  Assets:Trade:Cash                          20,000.00 USD
  Income:Trade:PnL                          -19,800.00 USD

The sum of all legs of the transaction, including -2 BTC {100.00 USD}, are still, as always, zero.

The costs {100.00 USD} tag is important because you might have bought the same commodity at different costs.

100 BTC {10.00 USD, 2012-08-08}
10 BTC {100.00 USD, 2014-08-08}

If you want to simplify the process, you can set up the account at the beginning with FIFO or LIFO. FIFO stands for first in, first out, while LIFO stands for last in, first out. In the US, IRS uses FIFO to calculate your PnL and tax accordingly.

1970-01-01 open Assets:Trade:Positions "FIFO"

And then when you sell it in shorthand like -2 BTC {}, beancount will apply FIFO strategy automatically and sell the oldest commodity.

Getting Started with Beancount.io​

Beancount.io is a modern cloud-based financial management platform that transforms your text-based transaction records into comprehensive financial statements, including income statements, balance sheets, and trial balances. By combining the reliability of plain text files with powerful visualization tools, Beancount.io helps you maintain precise control over your financial life while gaining valuable insights into your investment performance.

Start your financial journey with Beancount.io - Free during our promotional period!