UNIT VII: THE BASICS OF BANK ACCOUNTING Flashcards
how banks make profits by transforming the liabilities into assets
ASSET TRANSFORMATION
a way of describing the process of asset transformation is to say that banks “_____ short and ______ long”
borrow short and lend long
add: long-term loans using short-term deposits
THE BASICS OF BANK ACCOUNTING
a visual representation of individual accounts so that all additions and subtractions (debits and credits) to the account can be easily tracked and represented visually
T-ACCOUNT
THE BASICS OF BANK ACCOUNTING
left side of t-account is for?
DEBIT
THE BASICS OF BANK ACCOUNTING
right side of t-account is for?
CREDIT
DEBIT OR CREDIT
increase in asset
DEBIT
DEBIT OR CREDIT
decrease in asset
CREDIT
DEBIT OR CREDIT
increase in expense
DEBIT
DEBIT OR CREDIT
increase in liability
CREDIT
DEBIT OR CREDIT
increase in equity
CREDIT
DEBIT OR CREDIT
increase in income
CREDIT
DEBIT OR CREDIT
decrease in liability
DEBIT
DEBIT OR CREDIT
decrease in equity
DEBIT
DEBIT OR CREDIT
decrease in income
DEBIT
DEBIT OR CREDIT
decrease in expense
CREDIT
how is cash deposits in a savings account in the bank recorded in the accounting equation?
increase in cash (assets)
increase in on-line account (liabilities)
how is a check issued by another person/company to be deposited under the accountholder’s checking account recorded in the accounting equation?
increase in branch clearing account (assets)
increase in demand deposit account (liabilities)
how is cash withdrawal from a savings account in the bank recorded in the accounting equation?
decrease in cash (assets)
decrease in on-line account (liabilities)
how is cash withdrawal from a checking account in the bank recorded in the accounting equation?
decrease in cash (assets)
decrease in demand deposit account (liabilities)
how is encashing check issued by another person/company recorded in the accounting equation?
decrease in cash (assets)
increase in branch clearing account (assets)
account titles used
- cash
- on-line account
- demand deposit account
- branch clearing account
ASSETS, LIABILITIES, OR CAPITAL?
on-line account
LIABILITIES
ASSETS, LIABILITIES, OR CAPITAL?
demand deposit account
LIABILITIES
ASSETS, LIABILITIES, OR CAPITAL?
cash
ASSETS
ASSETS, LIABILITIES, OR CAPITAL?
branch clearing account
ASSETS
