Book Value
Definition
Book value is the original cost of a fixed asset minus its accumulated depreciation. It represents the asset's remaining value on the books.
Example
Equipment was purchased for $12,000. After two years, accumulated depreciation is $4,800. The book value is $12,000 − $4,800 = $7,200.
Why It Matters
Book value is what appears on the Balance Sheet. It is not the same as market value, and confusing the two can mislead the business owner.