1. What is Book Value?

Book value represents the net value of an asset on a company's balance sheet, calculated as the original cost minus accumulated depreciation. It shows the asset's current accounting value, not necessarily its market value.

2. How Does the Calculator Work?

The calculator uses the book value formula:

Where:

• \( \text{Cost} \) — Original purchase price of the asset
• \( \text{Accumulated Depreciation} \) — Total depreciation charged against the asset to date

Explanation: This simple subtraction gives the asset's carrying value on the balance sheet.

3. Importance of Book Value Calculation

Details: Book value is crucial for financial reporting, tax calculations, and assessing a company's net worth. It helps determine when assets need replacement and influences investment decisions.

4. Using the Calculator

Tips: Enter the original cost and total accumulated depreciation in the same currency. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is book value the same as market value?
A: No, book value is based on accounting records while market value reflects current selling price. They often differ significantly.

Q2: Can book value be negative?
A: Normally no, unless accumulated depreciation exceeds the original cost, which might indicate an accounting error.

Q3: How often should book value be calculated?
A: Typically at each accounting period end (monthly, quarterly, annually) as part of financial reporting.

Q4: What's the difference between book value and salvage value?
A: Book value is current accounting value, while salvage value is estimated residual value at end of useful life.

Q5: Does book value apply to intangible assets?
A: Yes, but instead of depreciation, intangible assets use amortization to reduce their book value.