Net Book Value Formula

Net book value formula original purchase cost accumulated depreciation original purchase cost here means the purchase price of the asset paid at the time when the company purchased the assets.

Net book value formula. 5 000 per month 600 000 120 months multiplied by the 12 months the asset was in use during 2016 5 000 12 months. The formula to calculate net book value is. Sample calculation of net book value.

Here s how to derive nbv using the above net book value formula. The original cost of an asset includes the original cost of acquisition plus any costs associated with the delivery and intended use of an asset to the purchase price. Accumulated depreciation here means total depreciation charged or accumulated by the company on its assets till the date of the calculation of the net book value of the asset.

Net book value is defined as the carrying value of the asset on the balance sheet of the company and is calculated as the original cost of the asset less the accumulated depreciation accumulated amortization accumulated depletion or accumulated impairment. The formula for calculating nbv is as follows. Nbv gross cost of asset accumulated depreciation let s start by calculating the original cost of an asset.

This is due to various reasons like. Formula for net book value. Nbv 100 000 7 000 x 5 years 65 000.

Net book value 540 000 in this example the accumulated depreciation was calculated by determining the depreciation amount per month and multiplying it by the number of months the asset was in use as of 12 31 2016. How to calculate net book value let s say abc trucking company purchases a semi truck for 100 000 and it has depreciated 7 000 each year for five years. Net book value original asset cost accumulated depreciation.

The net book value is one of the most known financial measures specifically when it comes to valuing companies. Accumulated depreciation per year depreciation x total number of years. Moreover it is also noteworthy that the net book value will never be equivalent to the market value.