Depreciated Cost

AAA

DEFINITION of 'Depreciated Cost'

1. The value of an asset net of all accumulated depreciation that has been recorded against it. It follows the formula of:

Depreciated Cost = Purchase Price (or cost basis) – {Cumulative Depreciation}

Depreciated cost is also known as the "net book value" or "adjusted cost basis".

2. In a broader economic sense, the depreciated cost for industry is the aggregate amount of capital that is "used up" in a given period, such as a fiscal year. This value can be examined for trends in capital spending and accounting aggressiveness.

INVESTOPEDIA EXPLAINS 'Depreciated Cost'

The depreciated cost method of asset valuation is an accounting tool used by both corporations and individuals. It allows for the books to always be carrying an asset at its current worth, and allows cash flows based on that asset to be measured in proportion to the value of the asset itself. It also allows for even tax treatment of large capital assets like homes, factories and equipment.


RELATED TERMS
  1. Accelerated Cost Recovery System ...

    A system of depreciation introduced by the Economic Recovery ...
  2. Adjusted Basis

    The proportionate value of an asset or security that reflects ...
  3. Useful Life

    An estimate of how long one can expect to use an income-producing ...
  4. Adjusted Cost Base - ACB

    An income tax term that refers to the change in an asset's book ...
  5. Declining Balance Method

    A common depreciation-calculation system that involves applying ...
  6. Unadjusted Basis

    A basis used for depreciation purposes. Unadjusted basis uses ...
Related Articles
  1. Personal Finance

    Breaking Down The Balance Sheet

    Knowing what the company's financial statements mean will help you to analyze your investments.
  2. Forex Education

    Depreciation: Straight-Line Vs. Double-Declining Methods

    Appreciate the different methods used to describe how book value is "used up".
  3. Taxes

    Tax Deductions For Rental Property Owners

    Besides creating ongoing income and capital appreciation, real estate provides deductions that can reduce the income tax on your profits.
  4. Forex Education

    Earnings Sustainability: The Key To Your Investing Future

    Learn how to analyze earnings sustainability - an important part of making sound investments.
  5. Options & Futures

    Due Diligence In 10 Easy Steps

    Got a hot stock tip? Follow up on it with these tips to avoid getting burned.
  6. Options & Futures

    Car Shopping: New Or Used?

    Don't get taken for a ride. Learn the pros and cons before the salesperson makes a pitch.
  7. Economics

    What Is The Labor Market Conundrum?

    We are facing a conundrum with investment implications: Why are wages still stagnant, when jobs are being created at the fastest pace since the late 90's?
  8. Economics

    Understanding Impairment

    In finance and accounting, impairment refers to the loss of value of a company’s capital stock.
  9. Economics

    Understanding Perpetuity

    Perpetuity means without end. In finance, a perpetuity is a flow of money that will be received on a regular basis without a specified ending date.
  10. Economics

    What is a Promissory Note?

    A written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.

You May Also Like

Hot Definitions
  1. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  2. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  5. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  6. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
Trading Center