Which of the following would be counted as a liability on a bank's balance sheet?

Choose 1 answer:
(A) Excess reserves
(B) Reserves held in the central bank's vaults
(C) Checking accounts
(D) Loans
(E) Required reserves held in bank vaults

Question

Which of the following would be counted as a liability on a bank's balance sheet?

Choose 1 answer:
(A) Excess reserves
(B) Reserves held in the central bank's vaults
(C) Checking accounts
(D) Loans
(E) Required reserves held in bank vaults

Accepted Answer

∻Solution by Steps∻ ‖ step 1 ⋮ Identify the nature of each item listed in the question to determine if it is an asset or a liability for the bank. ‖ ‖ step 2 ⋮ Recognize that liabilities are obligations that the bank owes to others. ‖ ‖ step 3 ⋮ Analyze the options: Excess reserves and required reserves (whether in the bank vaults or held at the central bank) are assets because they are owned by the bank. Loans are assets because they represent money the bank will receive. Checking accounts are liabilities because they represent money the bank owes to account holders. ‖ ‖ step 4 ⋮ Select the item from the list that is an obligation the bank owes, which is the definition of a liability. ‖ ∻Answer∻ ‖ ***C*** ‖ ∻Key Concept∻ ⚹Liabilities on a bank's balance sheet⚹ ∻Explanation∻ ⚹Liabilities are the bank's obligations to others, including deposits like checking accounts, which the bank must repay to account holders.⚹◊What is the probability of selecting a liability on a bank's balance sheet at random from the given answer choices?⍭ Generate me a similar question◊

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