Definition of Book Value of Debt

Definition of Book Value of Debt
A financial spreadsheet laid out on a table.

Book Value of Debt

For accounting purposes, debt is tracked using something called an amortization table. As the company makes its contractually obligated payments, a portion of each payment is allocated to the reduction of principal as well as to interest expense. This is necessary because interest expense is tax deductible. The amortization table details this allocation and displays the amounts paid, along with the current amount of principal remaining on the loan. This amount -- the original loan amount net of the reduction in principal -- is the book value of debt. Book value can refer to a specific debt, or to the total net debt reported on a company's balance sheet.