Book value

When you purchase an asset (e.g. equipment for the business) it must be recorded in your asset register. The tax laws do not allow you to claim this purchase as an expense, rather you may only deduct the depreciation value per year. The depreciation value is determined by the type of equipment. For example, computer equipment may be depreciated (deducted as an expense) at a rate of 33% per year for three years, whereas office furniture may be depreciated at a rate of 10% per year for ten years. The book value is the initial cost of the item, less the annual depreciation.