Also, called the “carrying value”, the net book value is the value of an asset in the accounts at any given point, calculated by: original value less accumulated depreciation OR previous year’s value less current year’s depreciation. (Ignoring, for the time being, revaluations and so on)
In yesterday’s examples, the net book values would be as follows:
Straight Line Method
At the end of year 1: £10,000 – £1,000 = £9,000
At the end of year 2: £10,000 – £1,000 – £1,000 = £8,000 OR 9,000 – £1,000 = £8,000
At the end of year 3: £10,000 – £1,000 – £1,000 – £1,0000 = £7,000 OR 8,000 – £1,000 = £7,000
etc…
Reducing Balance Method
At the end of year 1: £10,000 – £2,500 = £7,500
At the end of year 2: £10,000 – £2,500 – £1,875 = £5,625 OR £7,500 – £1,875 = £5,625
At the end of year 3: £10,000 – £2,500 – £1,875 – £1,406.25 = £4,218.75 OR £5,625 – £1,406.25 = £4,218.75
