What does the term "book value" refer to in depreciation?

The term "book value" refers to the value of an asset as recorded on the balance sheet, which is primarily determined by taking the original cost of the asset and subtracting any accumulated depreciation. This means that the book value represents the net worth of the asset in the company's financial statements at a given moment.

The original cost of an asset, without accounting for depreciation, would not reflect its current economic value or the value that is recognized in financial reports. Book value gives insight into how much of the asset's value has been used up over time through depreciation. Therefore, the correct understanding of "book value" aligns closely with the concept of original cost adjusted for depreciation.