Final answer:
Recording the asset net of the government grant results in understated assets option (c) on the balance sheet because the gross value of the asset is reduced by the grant amount.
Step-by-step explanation:
If the cost of an asset is recorded net of the government grant, then assets will likely be understated. This is because recording the asset net of the government grant reduces the gross value of the asset on the balance sheet by the amount of the grant.
The actual cost of the asset does not change, but the way it is reported makes it appear less than it would if the grant were recorded separately. Hence, the answer to the question is that (c) assets will likely be understated.
The "T" in a T-account separates the assets from the liabilities. For a bank, assets are the financial instruments held or owed to the bank, while liabilities are what the bank owes others. Net worth is calculated as total assets minus total liabilities. This accounting method ensures that assets always equal liabilities plus net worth.