Written Down Value

The portion of the acquisition cost of the asset, yet to be allocated is known as the written down value.

Explanation:

Written down value is the value of an asset after depreciation. The acquisition cost of an asset is the total cost of acquiring and preparing the asset for use. However, as the asset is used, its value decreases due to wear and tear, obsolescence, etc. This decrease in value is known as depreciation.

The written down value is the remaining value of the asset after deducting the accumulated depreciation from the acquisition cost. It is the portion of the acquisition cost that is yet to be allocated as depreciation expense.

For example, if a company purchases a machine for $10,000 and the accumulated depreciation on the machine is $4,000, the written down value of the machine is $6,000 ($10,000 - $4,000).

Importance of Written Down Value:

The written down value is important for accounting and tax purposes. It helps in determining the depreciation expense for the remaining life of the asset. This expense is deducted from the company's income, reducing its taxable income. Moreover, it also helps in determining the salvage value of the asset, i.e., the value that can be realized from the sale of the asset at the end of its useful life.

Conclusion:

In conclusion, the written down value is the portion of the acquisition cost of the asset that is yet to be allocated as depreciation expense. It is an important concept for accounting and tax purposes as it helps in determining the depreciation expense and salvage value of the asset.