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. Depreciation

    1. A method of allocating the cost of a tangible asset over its ...
  3. Adjusted Basis

    The proportionate value of an asset or security that reflects ...
  4. Equivalent Annual Cost - EAC

    The annual cost of owning an asset over its entire life. Equivalent ...
  5. Salvage Value

    The estimated value that an asset will realize upon its sale ...
  6. Adjusted Cost Base - ACB

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

    How Microeconomics Affects Everyday Life

    Microeconomics is the study of how individuals and businesses make decisions to maximize satisfaction. Microeconomic principles can describe many everyday experiences. We use renting a New York ...
  8. Personal Finance

    Why Are Tesla Cars So Expensive?

    What makes Tesla cars so expensive? Short supply and pricey parts is a good place to start.
  9. Fundamental Analysis

    What is a Null Hypothesis?

    In statistics, a null hypothesis is assumed true until proven otherwise.
  10. Economics

    What is M1?

    M1 is a measurement of money supply that includes all hard currency, plus demand deposits such as checking accounts.

You May Also Like

Hot Definitions
  1. Hurdle Rate

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

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  3. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  4. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  5. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
  6. Currency Carry Trade

    A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase ...
Trading Center