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.

BREAKING DOWN '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. Adjusted Basis

    The proportionate value of an asset or security that reflects ...
  2. Accelerated Cost Recovery System ...

    A system of depreciation introduced by the Economic Recovery ...
  3. Adjusted Cost Base - ACB

    An income tax term that refers to the change in an asset's book ...
  4. Useful Life

    An estimate of how long one can expect to use an income-producing ...
  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. Fundamental Analysis

    Examining Mexico's Trillion-Dollar GDP

    Examining the gross domestic product growth and composition of Mexico, the second largest economy in Latin America
  8. Economics

    Explaining Accounting Conservatism

    Accounting conservatism is a principal that requires accounting rules be applied with high degrees of verification.
  9. Fundamental Analysis

    What Causes Inflation in the United States

    Inflation is the main catalyst behind U.S monetary policy. But what causes this phenomenon of sustained rising prices? Read on to find out.
  10. Term

    What are Non-GAAP Earnings?

    Non-GAAP earnings are a company’s earnings that are not reported according to Generally Accepted Accounting Principles.
RELATED FAQS
  1. How do dividends affect the balance sheet?

    Dividends paid in cash affect a company's balance sheet by decreasing the company's cash account on the asset side and decreasing ... Read Full Answer >>
  2. Who actually declares a dividend?

    It is a company's board of directors who actually declares a dividend. The declaration date is the first of four important ... Read Full Answer >>
  3. Are dividends considered an expense?

    Cash or stock dividends distributed to shareholders are not considered an expense on a company's income statement. Stock ... Read Full Answer >>
  4. Do dividends go on the balance sheet?

    The only account recorded on the balance sheet, when dividends are declared and before they are paid out to a company's shareholders, ... Read Full Answer >>
  5. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  6. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Recession

    A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, ...
  2. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  3. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  4. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  5. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  6. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!