Book value equals the cost of including assets on the company balance sheet and calculating it with the net asset against the accumulated depreciation. Therefore, the book value can be considered as the net asset value of the NAV of the company. You will get this by calculating the total asset and deducting it from intangible assets and liabilities. When starting with an expense record of investment, book value is taken as the gross or net of expenses such as trading costs, service charges, sales tax, and others.
To calculate book value per share, it is the total common equity of stockholders deducted from the preferred stock. It is to be divided by the number of common company shares. Therefore, book value may be known as net book value. Therefore, book value can be rightly called the original cost of an asset and it is to be deducted from its impairment charges and the accumulated depreciation. In financial analysis, the market value is to be compared with book value.
In accounting, the book value is the company asset less all the claims to the company liabilities. Therefore, it is like recording the asset value at the original historical cost in accounting books. In accounting, the book value of assets remains the same throughout, and the company book value grows collectively. It is mainly due to the accumulated earrings that comes from asset use. The book value also shows the shareholding growth of the company, it can be easily compared with the market value.
When considering a firm accounting value, there are two uses:
1. It helps find the total value of the company assets that the shareholders would get when a company has been liquidated
2. When you compare it with the company market value, the result of the book value should indicate whether a particular stock is overpriced or correctly priced
Book value in real estate is the net cost dedicated to depreciation. It is also termed the net book value. Businesses can use this to determine how much depreciation costs the company can write off from the taxes. The calculation of book value in real estate goes as follows:
The calculation of an asset book value is mainly the original cost of the asset. From this, the accumulated depreciation has to be deducted from it. Here, the accumulated depreciation is mainly the average annual depreciation that is to be multiplied by age of an asset in years.
Asset book value= Original cost - (Annual Depreciation X Age)
