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Book Value: Definition and Meaning
Definition
Book value is the amount at which an asset, liability, or equity item is recorded in the accounting records. For a depreciable asset, book value is often original cost minus accumulated depreciation.
Why It Matters
Book value is an accounting measure and may differ from market value, replacement cost, insured value, or the amount a buyer would pay. Understanding the distinction can be important when considering equipment replacement, financing, business valuation, or a potential sale.
For long-lived assets, book value is affected by depreciation, impairment, disposals, and other accounting adjustments.
Example
Equipment purchased for $30,000 has $12,000 of accumulated depreciation. Its book value is $18,000.
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