Dictionary / Adjusted Basis
What does Adjusted Basis mean in accounting?
Quick definition
Accrual & timingThe basis used in computing depreciation, or gain or loss on sales of fixed or non-inventory assets. This term guides how bookkeepers record, classify, and explain related transactions in routine financial reporting.
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Examples
A van sale uses the running figure
On April 8, 2021 your plumbing shop bought a delivery van from a van dealer for $38,000, and in September 2022 you added a $2,400 rack from a plumbing supplier. Through the March 15, 2026 sale to a fleet buyer for $16,500, the fixed-asset schedule shows $21,600 of accumulated depreciation. Adjusted basis is $18,800: $38,000 plus $2,400 minus $21,600. Retire the van in QuickBooks Online or Xero: clear the $40,400 cost and $21,600 depreciation, take in the $16,500, and put the $2,300 leftover on the P&L as a loss. Do not compute the sale from the $38,000 invoice; that ignores the rack and the wear already taken.
A feeder kit is not a fresh start
Your print shop's printing press still sits on the fixed-asset schedule at the $62,000 original cost from a press dealer, with $28,800 of accumulated depreciation. On August 11 you enter a $4,100 feeder from a press service company against the press in QuickBooks Online or Xero, then almost start a new depreciation run from $62,000. Adjusted basis is $37,300: $62,000 plus $4,100 minus $28,800. Reset remaining depreciation from $37,300, not from the original invoice. If you depreciate the full original cost a second time, you take wear you already recorded.
Why it matters
Adjusted basis is the running figure you use to compute depreciation and gain or loss when you sell a fixed asset, not inventory. You will not change it most months; it moves when you add a capital improvement, take depreciation, or retire the asset. Start from original cost, add improvements, subtract accumulated depreciation and similar adjustments, then use that number. If you sell from the purchase price alone, you ignore wear already taken and report the wrong gain or loss; if you skip an improvement, later depreciation is too small and a later sale looks more profitable than it was.
Keep learning
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What is Adjusted Basis in bookkeeping?
The basis used in computing depreciation, or gain or loss on sales of fixed or non-inventory assets.
When should I use Adjusted Basis?
Use Adjusted Basis when the transaction facts match its definition and you need the ledger and financial statements to reflect the correct account and period.
What is a common mistake with Adjusted Basis?
Adjusted Basis is used for adjusted basis entries, while Abandonment covers a related but distinct bookkeeping purpose. Review both terms before posting unusual transactions. A common mistake is applying it by label only instead of checking the underlying transaction details.