A bank loans Benjamin's Print Shop $130,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

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When a bank issues a loan, it is recorded as an asset on the bank's balance sheet because it represents money the bank expects to get back with interest. For the borrower, in this case, Benjamin's Print Shop, the loan is a liability because it is money that the shop owes to the bank. The issuance of a loan increases the money supply because it puts more money into circulation that the borrower can spend.

A Bank Loans Benjamin's Print Shop $130,000 to Remodel a Building