The Basic Add-Subtract Format

January 7, 2021

A Simple Tool for Solving Many CPA Exam Questions

What do accounts receivable, T-accounts, inventory, PP&E, total assets, cost of goods sold, and other account balances have in common? They can all be solved using simple modifications of the basic add-subtract format.

Basic Add-Subtract Format:

  • Beginning balance:     ___________
  • Add:            ___________
  • Subtotal:        ___________
  • Ending balance:    ___________

Many CPA exam questions give partial information and expect you to solve for the missing values. In this format, you can start from the top and solve for the ending value, start from the bottom and solve for the beginning value, or start on both ends and solve for a middle value.

Examples of the Add-Subtract Format:

Examples of the Add-Subtract Format

Sample Question

Accounts Receivable CPA Exam Practice Questions

Woodyard Co.’s records contained the following year-end information:         

  • Inventory Purchased     $430,500      
  • Trade Discounts     65,350          
  • Beginning inventory     30,840      
  • Ending inventory     20,560      

Based on this information, calculate Woodyard Co.’s year-end cost of goods sold.


This information doesn’t provide the Cost of Goods Manufactured, but it does tell the cost of inventory purchased. So, with a small modification, the add-subtract format works here.

In this format, the subtotal is a very important tool. Starting from the top, we add purchases to arrive at the subtotal. Then we can use that subtotal to calculate the missing number.

$395,990 – COGS = $20,560. Therefore COGS = $375,430.

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