CMFAS RES5 Advisory Process & Skills question: assets and liabilities normally valued

CMFAS RES5Advisory Process & Skills

On a personal balance sheet, how are assets and liabilities normally valued?

A Both assets and liabilities at their original cost
B Assets at original cost; liabilities at current fair market value
C Assets at current fair market value; liabilities at original (principal) cost
D Both assets and liabilities at their projected future value

Show the answer and explanation

Answer: C. Assets at current fair market value; liabilities at original (principal) cost

Assets are reported at current fair market value (though hard-to-value items are sometimes shown at original cost to stay conservative), while liabilities are reported at original cost, showing the outstanding principal owed.

Common mistake

The valuation bases differ for the two sides — reversing them (liabilities at market value, assets at cost) is the classic error.

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