Book value (carrying value)

Book (or carrying) value is an accounting term that usually refers to a net amount, the remainder after a subtraction has occurred. Book values are commonly encountered in the accounting for assets and liabilities. For example, assume a firm has accounts receivable in the amount of $300,000. The related contra-asset account, Allowance for bad debts, has a balance of $25,000. The asset account has a debit balance, the contra-asset account has a credit balance, and the difference between the two is a net debit balance of $275,000. Because not all of the accounts receivable will prove collectible, the net realizable value of the firm’s accounts receivable is $275,000, and this is the book, or carrying, value of the accounts receivable. Paying homage to the principle of conservatism (one of the generally accepted accounting principles), the accounts receivable are being “carried” at $275,000, the amount that is more likely to be collected than the amount of $300,000 actually owed to the firm. Assume Machine No. 3 has a cost of $900,000. The related contra-asset account, Accumulated Depreciation, has a credit balance of $350,000. The difference between the two amounts is a net debit balance of $550,000. This is the book (carrying) value of Machine No. 3. For another example, assume a firm borrows money with a non-interest-bearing note payable. With such notes the interest rate is implicit, and the proceeds of the note are less than its face value. When the borrower records this liability as a note payable, a contra-liability account, Discount on Note Payable, is also established to record the difference between the face value of the note payable and the proceeds received from issuing the note. This will allow the book, or carrying, value of the note payable to be equal to the proceeds received from issuing the note.
See also debit, credit.