Three statements Updated November 2026

PP&E roll-forward

Closing net PP&E = opening net PP&E + capital expenditures - depreciation - net book value of disposals. The roll-forward is how a three-statement model projects fixed assets: capex comes from the cash flow forecast, depreciation from the depreciation schedule, and the closing balance feeds the balance sheet.

Syntax

Closing PP&E = Opening PP&E + CapEx - Depreciation - Disposals

Part	What it is
`Opening PP&E`	Prior year closing net PP&E (link, do not retype)
`CapEx`	Purchases of fixed assets, often forecast as a percent of revenue
`Depreciation`	Current year charge from the depreciation schedule

Examples

Opening 500, capex 120, depreciation 80
=500 + 120 - 80

Result: 540

Next year: opening 540, capex 130, depreciation 90
=540 + 130 - 90

Result: 580

Capex forecast at 6% of revenue 1,000
=1000 * 6%

Result: 60

Common mistakes

Typing opening PP&E instead of linking it to last year's closing cell, so the chain breaks when an assumption changes.
Subtracting gross capex but using depreciation on gross cost with no accumulated depreciation line: pick either a net roll-forward or a gross plus accumulated depreciation layout.
Forgetting that capex on the cash flow statement must equal the capex used here, or the balance sheet will not balance.

Practice PP&E roll-forward

These drills check your answer on live data, free, no account needed.

Fixed asset roll-forwardRoll the fixed asset balance forward. Closing balance (row 8) is opening plus capital spending less depreciation. Each year after the first opens with the prior year's closing balance (row 5).
Straight-line depreciation by assetThree assets are depreciated straight line to zero over their useful lives. Row 4 numbers the years of use. Fill D5:H7 with one formula that charges cost divided by life while the asset is still within its life, and zero after. Then total each year in row 8.

Questions

Should capex be higher than depreciation?

For a growing company yes; for a mature one they converge. In the terminal year of a DCF keep capex at or slightly above depreciation so PP&E supports the assumed growth.

Where does the PP&E roll-forward link in the three statements?

Capex goes to investing cash flow, depreciation to the income statement and the CFO add-back, and closing PP&E to the balance sheet.

Depreciation scheduleHow to build a depreciation schedule: straight-line = (cost - salvage) / life, Excel SLN and DDB functions, depreciation from the purchase year, waterfalls.
Three-statement modelHow a three-statement model links net income, depreciation, capex, working capital, debt and cash so the balance sheet balances. Build order, links, check.
Cash flow from operationsCFO = net income + D&A + other non-cash charges - increase in working capital. How the indirect method works line by line, a worked example and sign errors.
Unlevered free cash flowUnlevered free cash flow = EBIT x (1 - tax rate) + D&A - capex - increase in net working capital. Examples from EBIT and from EBITDA, plus the sign rules.