Book Value

What is Book Value ?

Book Value describes the value of an asset or investment registered in the books of an organization or an individual.

The asset mentioned in the above paragraph could be a car or the asset of a company. When the asset is an individual entity, the book value is calculated as-

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Initial Value of the asset in the beginning of the year – depreciation accumulated every year)

For Example:  If a person buys a laptop for Rs 32000 in the year 2011. The laptop will depreciate at a rate of 60% per annum according to the IT act. Thus the Book value of the laptop in the following year will be given by the difference between Rs 32000 and 60% of Rs 32000.

Depreciation occurs for any tangible asset. It occurs due to wear and tear of an asset and due to environmental factors.

When we are talking about the asset value of a company, the book value is calculated as-

Book Value= (Total assets of the company – Total liabilities)

The book value of an investment is the amount by which the asset or security is bought.

Edited and Updated 18th January 2014

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