What is computed by subtracting accumulated depreciation from historic or acquisition cost?

The concept of subtracting accumulated depreciation from historic or acquisition cost leads to the calculation of net book value. Net book value represents the value of an asset as recorded on the balance sheet after accounting for depreciation. This figure reflects the remaining value of an asset that has been subject to wear and tear or obsolescence over its useful life.

When an asset is obtained, it has an initial cost, known as its historical cost or acquisition cost. As time passes, the asset depreciates, and its accumulated depreciation increases. By subtracting this accumulated depreciation from the historical cost, you arrive at the net book value, which is an important metric for financial reporting and asset management.

In contrast, net residual value generally refers to the estimated value of an asset at the end of its useful life, market value is the current value of an asset in the marketplace, and fair market value is the price that an asset would sell for on the open market, as agreed upon by a willing buyer and seller. Thus, these options do not represent the result of subtracting accumulated depreciation from the initial cost.