Final answer:
The book value is calculated by subtracting the book value of liabilities from the book value of assets to determine the net worth of an entity.
Step-by-step explanation:
The book value of an entity is calculated by subtracting the book value of liabilities from the book value of assets. Assets are things of value that the entity owns, such as cash, properties, and investments. Liabilities are debts or obligations that the entity owes, such as loans and payables.
Subtracting the book value of liabilities from the book value of assets gives the net worth or book value of the entity. This calculation is commonly used in financial accounting to determine the value of an entity based on its assets and liabilities.