The original cost of an asset minus the accumulated depreciation is known as the:

The original cost of an asset minus the accumulated depreciation is known as the:

a. book value. b. market value. c. original value. d. depreciation.

Answer: a. book value

Another meaning of the book value of assets is the net asset value especially where the net asset value is the value which stays between the cost of the asset and the depreciation charge on the asset. This is the value given to the total amount of the asset throughout the company’s book value or the statement of the financial position.

The book value is very crucial since it represents the valuation retained after the vigorous application of depreciation and expensing throughout the useful life of the asset. It applies any time it is used in the computation of account of depreciation with respect to the asset and in the assessment of the profit or loss, as the case may be, of the sale of the asset.

The market value which is the current value that can be fetched by the asset in the market must also be considered while valuing the assets. The original value determines the cash paid on purchasing the asset while depreciation is a method of reducing the value of the asset over the useful life of the asset.