The total cost of an asset less its accumulated depreciation is called:
A) historical cost.
B) book value.
C) present value.
D) current (market) value.
A book value for an asset is its original cost minus accumulated depreciation and impairment charges. The book value of assets is routinely compared to the market value as part of various financial analyses.These calculations can be used by businesses to determine how much depreciation they can deduct from their taxes. It may not always be perfectly aligned with fair market value because book value is an accounting and tax calculation. It is possible to apply book value to individual assets as well as to entire companies. The concept of depreciation, however, may not apply to all assets when applied more broadly. When assessing the book value of an entire company, shareholder equity and debt are also taken into account.
Property assets that can be depreciated are calculated as book value. In addition to furniture, equipment, buildings, and other personal property, depreciable assets have lasting value. A book value is the cost of an asset after its initial purchase because there has been no accumulated depreciation. Then, as the years pass, as the cost does not change, the accumulated depreciation goes up and the book value decreases. Depreciation of assets can be quantified by the book value, which is important for tax purposes. The profit and loss statement of a business shows depreciation as an expense. Business taxes are reduced as a result of depreciation.
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