Consider a bank balance sheet, with "Assets" on the left and "Liabilities" on the right side. Identify where the following items belong. I. Deposits this bank holds in an account with another private bank. II. Borrowings from another bank in the interbank loan market. A. Both assets. B. I: liabilities; II: assets. C. I: assets; II: liabilities. D. Both liabilities.

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Business

Belinda Cherry

8 February, 13:59

Consider a bank balance sheet, with "Assets" on the left and "Liabilities" on the right side. Identify where the following items belong. I. Deposits this bank holds in an account with another private bank. II. Borrowings from another bank in the interbank loan market. A. Both assets. B. I: liabilities; II: assets. C. I: assets; II: liabilities. D. Both liabilities.

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Answers (1)

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Jesus Hicks · Answer 1

C. I: assets; II: liabilities.

Explanation:

In the classified balance sheet, we summarize the asset and liabilities into various types

Like assets are divided into fixed assets, current assets, and intangible assets.

Likewise, liabilities are also divided into current liabilities, long term liabilities

In every balance sheet, the accounting equation is used that means

Total assets = Total liabilities + Shareholder equity

In the first transaction, the deposit is made so the cash balance should be increased and hence, it is included in the asset account

And, in the second transaction, the borrowings were made which is a liability. So, it is included in the liabilities account

Hence, option C is correct