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What is Book Value?

A term used in financial accounting to represent a company's historical cost of assets and liabilities less any accumulated amortization (which is recorded in a contra-account).

The book value of an asset may have little or no relation to the market value of the same asset. It is simply the value of an asset according to its balance sheet account balance.

Gains and Losses

Whenever a sale of an asset is made for less than its book value (meaning that market value is greater) a loss is recognized on the income statement based on the sale of the asset.

If an asset is sold for more than its book value (usually land or property), a gain is then recognized on the income statement as a result.

 

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