On a bank's T-account,
A)both deposits and reserves are assets.
B)both deposits and reserves are liabilities.
C)deposits are assets, reserves are liabilities.
D)reserves are assets, deposits are liabilities.

Question

Quizplus · Accepted Answer

Reserves are assets because they are the funds held by the bank to meet depositors' withdrawal requests. Deposits, on the other hand, are liabilities because they represent the amount the bank owes to its depositors. Therefore, deposits and reserves are recorded on opposite sides of a bank's T-account.

On a Bank's T-Account