Net Book Value Formula

Net book value 540 000 in this example the accumulated depreciation was calculated by determining the depreciation amount per month and multiplying it by the number of months the asset was in use as of 12 31 2016.

Net book value formula. Sample calculation of net book value. The formula to calculate net book value is. To calculate the net book value for an asset apply the following formula.

Accumulated depreciation per year depreciation x total number of years. Significance of net book value. Nbv gross cost of asset accumulated depreciation let s start by calculating the original cost of an asset.

This means the net book value of the truck would be 65 000 after five years. Net book value formula original purchase cost accumulated depreciation original purchase cost here means the purchase price of the asset paid at the time when the company purchased the assets. The formula for calculating nbv is as follows.

Net book value original asset cost accumulated depreciation. Book value formula calculates the net asset of the company derived by total of assets minus the total liabilities. Accumulated depreciation here means total depreciation charged or accumulated by the company on its assets till the date of the calculation of the net book value of the asset.

When it reaches the end of its useful life the nbv should be equal to its salvage value. Alternatively book value can be calculated as the sum total of the overall shareholder equity of the company. Calculating net book value.

Besides it can also be used with regards to a particular asset or even to an entire company. Here s how to derive nbv using the above net book value formula. Nbv 100 000 7 000 x 5 years 65 000.