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Simple English definitions for legal terms
net book value
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A quick definition of net book value:
Net book value refers to the value of an asset that is recorded in an organization's books, after subtracting the amount of depreciation that has occurred since the last time the asset was valued. Essentially, it is the current worth of the asset, taking into account any wear and tear or loss of value over time.
A more thorough explanation:
Definition: Net book value is the value of an asset that appears on a company's financial records, minus the amount of depreciation that has been recorded since the asset was last valued.
Example: Let's say a company purchased a delivery truck for $50,000. After a year of use, the company records $10,000 in depreciation for the truck. The net book value of the truck after one year would be $40,000 ($50,000 - $10,000).
Another example could be a computer that a company purchased for $1,000. After two years of use, the company records $600 in depreciation for the computer. The net book value of the computer after two years would be $400 ($1,000 - $600).
These examples illustrate how the net book value of an asset is calculated by subtracting the accumulated depreciation from the original cost of the asset. This calculation provides a more accurate representation of the asset's current value on the company's financial records.