PP&E – What is PP&E?

PP&E – an abbreviation of property, plant, and equipment – is a company asset that is essential to the running of a business and cannot be easily liquidated.

Debitoor invoicing software helps small businesses track company assets, including PP&E. Try Debitoor free for 7 days.

Examples of PP&E include land, offices, warehouses, factories, machinery, and vehicles.

Businesses and industries that require a large amount of PP&E are known as ‘capital intensive’.

What kind of asset is PP&E?

PP&E is a fixed, tangible asset. It is a tangible asset because property, plant, and equipment are physical items with a clear purchase value. It is a fixed asset because PP&E cannot easily be sold or turned into cash and is expected to add value to a business for over a long period of time.

PP&E in accounting

Property, plant, and equipment should be recorded on the balance sheet at historical cost. Historical cost refers to both the initial purchase price, plus any costs associated with making the asset fit for purpose.

For example, if a company purchases a new office, the historical cost would include the money spent on the initial purchase, plus any money spent on refurbishments, redecorating, or other improvements.

Because fixed assets depreciate over time, the value of PP&E should be adjusted at the end of each accounting period using amortisation. However, land should not be amortised because land often increases in value. Instead, land should be represented at the current market value.

PP&E and taxes

When you buy land or property for your business, you will likely be subject to certain taxes. In the UK, the tax you pay depends on where you live.

In England and Northern Ireland, you must pay Stamp Duty on any commercial land or property valued over £150,000; there are different rules for residential properties. In Scotland, there is a simillar tax called Land and Buildings Transaction Tax. In Wales, Land Transaction Tax replaced Stamp Duty on April 1st, 2018.

Property, plant and equipment in Debitoor

With Debitoor invoicing software, you can easily track company assets, including PP&E. When you create a new expense in Debitoor, you can choose whether to mark it as an asset. If you select this option, you can choose which category the asset falls under, then turn on depreciation. Debitoor automatically applies straight-line depreciation to any new asset, helping you break down the cost of your asset over a number of years.