Book Value Accounting Definition
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In accounting book value refers to the amounts contained in the company s general ledger accounts or books.
Book value accounting definition. Nbv is calculated using the asset s original cost how much it cost to acquire the asset with the depreciation depletion or amortization. Amortization amortization refers to the process of paying off a debt through scheduled pre determined. The npv of an asset is essentially how much the asset is.
Book value is the net asset value nav of a company s stocks and bonds. It is important to realize that the book value is not the same as the fair market value because of the accountants historical cost principle and matching principle. Finding the nav involves subtracting the company s short and long term liabilities from its assets to find net assets.
The term book value derives from the accounting practice of. The asset s cost minus the asset s accumulated depreciation. Book value is calculated by subtracting any accumulated depreciation from an asset s purchase price or historical cost.
Net book value nbv refers to a company s assets or how the assets are recorded by the accountant. Book values are important for valuation purposes because they are based on accounting principles which are calculated consistently for all companies. Book value represents the value of assets and liabilities at the date they are reported in a company s documents.
The book value of an asset is an accounting calculation that measures the impact of depreciation on an asset s value. Home accounting dictionary what is book value. What does net book value mean.
Book value of an asset is. The book value of an asset is the amount of cost in its asset account less the accumulated depreciation applicable to the asset. For most assets and liabilities book values are based on the historic cost of items.
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