CA Foundation Exam > CA Foundation Questions > Deposits in the banks are:a)Assets of the ban...
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Deposits in the banks are:
- a)Assets of the bank
- b)Liabilities of the bank
- c)Liabilities of the depositors
- d)None of the above
Correct answer is option 'B'. Can you explain this answer?
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Deposits in the banks are:a)Assets of the bankb)Liabilities of the ban...
Assets and Liabilities in Banking
Assets of the bank:
- Assets are what the bank owns, such as cash, loans, investments, and physical assets like buildings and equipment.
- These are resources that the bank can use to generate revenue and provide services to customers.
- Assets also include the money that customers have deposited in the bank, which the bank can use to lend out to other customers.
Liabilities of the bank:
- Liabilities are what the bank owes, including deposits from customers, loans from other banks, and bonds issued to investors.
- Deposits in the bank are considered liabilities because the bank is obligated to repay these funds to customers on demand.
- When a customer deposits money in the bank, the bank is essentially borrowing that money from the customer.
- The bank must keep a portion of these deposits on reserve and can use the rest to make loans and investments to earn interest.
Therefore, deposits in the banks are classified as liabilities of the bank because they represent funds that the bank owes to its customers. This distinction is important for understanding the balance sheet of a bank and how it manages its assets and liabilities to ensure financial stability and liquidity.
Assets of the bank:
- Assets are what the bank owns, such as cash, loans, investments, and physical assets like buildings and equipment.
- These are resources that the bank can use to generate revenue and provide services to customers.
- Assets also include the money that customers have deposited in the bank, which the bank can use to lend out to other customers.
Liabilities of the bank:
- Liabilities are what the bank owes, including deposits from customers, loans from other banks, and bonds issued to investors.
- Deposits in the bank are considered liabilities because the bank is obligated to repay these funds to customers on demand.
- When a customer deposits money in the bank, the bank is essentially borrowing that money from the customer.
- The bank must keep a portion of these deposits on reserve and can use the rest to make loans and investments to earn interest.
Therefore, deposits in the banks are classified as liabilities of the bank because they represent funds that the bank owes to its customers. This distinction is important for understanding the balance sheet of a bank and how it manages its assets and liabilities to ensure financial stability and liquidity.
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Deposits in the banks are:a)Assets of the bankb)Liabilities of the ban...
Because bank will use this money to provide loan for others but it is bank's first duty to return to the depositor.In other words it is liability of bank because bank will pay this money with interest.
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Deposits in the banks are:a)Assets of the bankb)Liabilities of the bankc)Liabilities of the depositorsd)None of the aboveCorrect answer is option 'B'. Can you explain this answer?
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