Question

The difference between these two balances is the cost of the office equipment that has not yet been depreciated. This amount is called the ______________________________________________, and is computed as follows:

Book Value of Asset = Cost of Asset - Accumulated Depreciated of Asset

Answer 1

The book value of an asset is calculated by subtracting the accumulated depreciation from the asset's original cost, essential for understanding a bank's balance sheet.

Step-by-step explanation:

The difference between the book value of an asset and its cost, minus the accumulated depreciation, is called the book value of the asset. The formula to compute the book value is as follows: Book Value of Asset = Cost of Asset - Accumulated Depreciation of Asset. This concept is rooted in accounting practices and is essential for understanding a bank's balance sheet, which lists assets and liabilities. An asset is something valuable that is owned and can be used to produce income or other benefits, such as cash or a home. A liability, on the other hand, represents a debt or obligation that must be paid, like a mortgage. The net worth, or bank capital, is determined by subtracting the total liabilities from the total assets, an important indicator of a bank's financial health.