Final answer:
The carrying amount, or book value, is the balance sheet value of an asset, adjusted for factors like depreciation. This differs from market value, which is the potential selling price in the market. Understanding this concept is crucial for analyzing a bank's balance sheet and financial health.
Step-by-step explanation:
The carrying amount (also called book value or net book value) refers to c) The amount at which an asset is recognized on the balance sheet. It is not necessarily the original cost of an asset, as it is adjusted for factors such as depreciation, impairment loss, or amortization. The carrying amount is different from the market value, as the latter refers to the price at which an asset could be sold in the market, while the former is an accounting valuation.A bank's balance sheet will list this carrying value of the assets, alongside liabilities and owner's equity, which reflects the bank's net worth or bank capital. Assets can include cash, loans to customers, and securities, while liabilities consist of deposits and any debts the bank owes. The difference between these assets and liabilities is the net worth or equity of the bank, which represents the value owned by the shareholders.In summary, the carrying amount is a vital concept for understanding a bank's financial health, as represented on its balance sheet, where it balances assets with liabilities plus the bank's net worth.