Basis

Basis is the initial cost from which a gain or loss is calculated. For example, a person buys an asset for $1,000 and sells it for $1,100. The $1,000 figure is the basis that is used to calculate a gain of $100. The concept is also used in the calculation of depreciation and amortization. For example, a business buys and installs an asset for a total cost of $5,000. This figure is the basis upon which depreciation is calculated.