An asset’s book value is its recorded value in the accounts after applicable depreciation. For a depreciable asset, the basic calculation is historical cost − accumulated depreciation. A truck recorded at $25,000 with $5,000 of accumulated depreciation, for example, has a book value of $20,000. This is an accounting carrying amount, not necessarily the price the asset would sell for today.
How to calculate an individual asset’s book value
For an individual depreciable fixed asset, calculate:
Book value = historical cost − accumulated depreciation
Historical cost is the amount recorded when the asset was acquired. Accumulated depreciation is the total depreciation allocated to the asset to date; it is recorded in a contra-asset account that offsets the asset’s cost on the balance sheet. The remaining amount represents the recorded cost not yet allocated to depreciation expense. See OpenStax’s explanation of depreciation and book value.
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Worked example
Suppose a business records a truck at $25,000 and has accumulated $5,000 of depreciation. Subtract the accumulated depreciation from the original recorded cost: $25,000 − $5,000 = $20,000 book value. These figures are an instructional example from OpenStax, not a market valuation.
What changes an asset’s book value?
Depreciation method and time
Depreciation allocates an asset’s cost over its useful life. Common methods include straight-line, units-of-production, and double-declining-balance. Because these methods allocate cost at different rates, they can produce different accumulated depreciation—and therefore different book values—at a given point in time. The calculation uses the accumulated depreciation actually recorded for the asset.
Assets that are not depreciated
Not every asset is depreciated. In OpenStax’s example, land is not depreciated because it is assumed to have an unlimited useful life, so it remains recorded at historical cost. Other accounting adjustments, such as amortization or impairment, can affect an asset’s carrying amount as well; the appropriate treatment depends on the asset and applicable accounting rules.
Individual-asset book value versus company book value
“Book value” can refer to different amounts, so check whether the question concerns one asset or an entire company.
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Clear out junk files and repair common Windows errorsFree Scan →Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →| Meaning | Calculation | What it describes |
|---|---|---|
| Individual asset | Historical cost − accumulated depreciation, for a depreciable asset | The asset’s carrying amount in the accounts |
| Company | Total assets − total liabilities | Shareholders’ equity, or the company-wide residual shown on the balance sheet |
The company-level calculation is not a substitute for calculating the book value of a particular machine, vehicle, or building. For the company-wide meaning, see OpenStax’s discussion of accounting and market values.
Book value is not market value
Book value follows accounting records and cost allocation; market value reflects current market conditions and what an asset might be worth in a transaction. They answer different questions and can differ substantially. Under the GAAP discussion in OpenStax’s finance text, assets are recorded at historical cost; an increase in the value of land or buildings is not automatically reflected in that recorded amount, while depreciable assets are shown at historical cost less accumulated depreciation. Useful-life estimates also affect depreciation and the resulting carrying amount.
As a result, book value alone does not tell you what a buyer would pay today. A market estimate requires information about current conditions and the specific asset, rather than only its accounting cost and accumulated depreciation.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.When the basic formula is not enough
The cost-minus-accumulated-depreciation formula is a useful starting point for a depreciable fixed asset. It should not be treated as a universal formula for every asset or every accounting situation. Amortization, impairment, the applicable reporting framework, and the asset’s facts may affect its carrying amount. For a specific financial statement or transaction, use the relevant accounting rules and records rather than assuming that depreciation is the only adjustment.
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