Net Book Value Formula Accounting

Net book value original asset cost accumulated depreciation.

Net book value formula accounting. Net book value cost of the asset accumulated depreciation here s a quick example. Suppose company x bought a vehicle three years ago for 40 000. 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.

The formula to calculate net book value is. Nbv gross cost of asset accumulated depreciation let s start by calculating the original cost of an asset. 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 for calculating nbv is as follows. 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. To calculate the net book value for an asset apply the following formula.

Net book value is therefore an amount which reflects the value of fixed asset placed on the balance sheet and is calculated as a difference between the cost of the asset and the accumulated depreciation for the same. Alternatively book value can be calculated as the sum total of the overall shareholder equity of the company. Book value formula calculates the net asset of the company derived by total of assets minus the total liabilities.

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. It can be defined as the net asset value of the firm or of the company that. Calculating net book value.

The original cost of an asset is the acquisition cost of the asset which is the cost required to not only purchase or construct the asset but also to bring it to the location and condition intended for it by management. Accumulated depreciation per year depreciation x total number of years. The term net book value or nbv refers to the net value of assets reported by the company in its balance sheet.