Why depreciated cost matters to a first-time founder
This amount affects reported assets, profit on disposal and some financing decisions. It helps founders reconcile the asset register with the accounts. However, relying on it as a sale price can mislead, because accounting depreciation does not continuously measure what a buyer would pay.
Examples of depreciated cost
A delivery van cost €40,000 and has accumulated depreciation of €15,000. Its depreciated cost, or net book value, is €25,000 before any impairment. If the company sells it for €28,000, the accounts generally show a €3,000 gain, subject to the applicable reporting rules.
Common misunderstanding
Depreciated cost is not market value. It starts from recorded cost and subtracts accumulated depreciation, while market value reflects what buyers may currently pay. Depending on the accounting framework, “carrying amount” can also include impairment, revaluation or other adjustments, so the terms are not always exact synonyms.
When to use it
Use it for asset-register reviews, management accounts, disposals and financial statements. Confirm the cost, accumulated depreciation and any impairment rather than estimating from age alone. Obtain a valuation when a decision depends on current sale value, collateral value or replacement cost instead of accounting records.