Practice Quiz

CFP Certified Financial Planner Test Prep

Category - Foundation

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If we add back the depreciation expense in a closing book value of fixed assets and deduct it from the opening balance of fixed assets, the positive value of the residual is the:

  1. Addition of assets
  2. Deletion of assets
  3. Difference of assets
  4. None of the above
Explanation

Answer: A - This is called the addition of assets.

If an asset is acquired during the period it is always on the debit side of the account. As depreciation expenses and the closing value of assets appear on the credit side of the account, the addition of assets is always calculated by deducting the opening balance from the closing balance and depreciation expenses.

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