What is book value?

The book value is also known by the name of book value. According to General Accounting Plan or PGC, the book value of a certain item is the net amount reflected in the accounting. The corresponding depreciation, impairment or corrections made to its value should be deducted from said book value.

Types of book values

The book value can refer to a certain element or to the whole of a company.

Book value of an item

Therefore, the book value of an asset element is equal to the amount reflected in the accounting for that item minus the depreciations recorded. The book value of an element of the liability will be equal to the value reflected in its accounting.

Book value of a company

The book value applied to the whole of a company refers to the amount of the net worth. This book value represents, therefore, the difference between the assets and the liabilities of the company.

Calculation of book value

When it comes to reflecting the book value of each element of the company in accounting, we must adhere to a series of valuation rules. These standards are used to classify the elements and offer a valuation formula for each type.

Items with monetary content

Those elements of assets and liabilities that include a monetary value will be reflected in the accounting with that value. This category includes:

  • The treasury
  • The p├ęstamos and other debts with credit institutions
  • Creditors and suppliers
  • Accounts receivable from customers
  • The payroll and social security.

Elements of equity

The items of equity have their own valuation standards. This category includes:

  • Capital
  • Bookings
  • Results

Elements of intangible assets

The elements of intangible assets they will be valued according to their useful life. This category includes:

  • Industrial property
  • Development expenses
  • Goodwill

Rest of elements

The other elements will be valued according to their manufacturing cost or acquisition value.

Tool to calculate the value of companies

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