Banking and Money Creation Understanding Assets and Liabilities.
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Transcript of Banking and Money Creation Understanding Assets and Liabilities.
Banking and Money Creation
Understanding Assets and Liabilities
The T-Account: Assets and Liabilities
Assets Liabilities
A T-account keeps track of an individual’s or business’s assets and liabilities: • assets (the things of value) on the left and• liabilities (amounts owed to others) on the right.
Mr. Bargen’s T-account
House $100,000Car $10,000Playstation 4 $350
Mortgage $70,000Car Loan $5,000
The T-Account: From a Bank’s Perspective
Assets LiabilitiesMr. Bargen’s T-account
House $100,000Car $10,000Checking account at the bank $1,000Playstation 4 $350
Mortgage $70,000Car Loan $5,000
Assets LiabilitiesPinnacle Bank’s T-account
Loans $1,000,000Reserves $100,000
Deposits $1,000,000
Notice that while bank deposits are an asset for Mr. Bargen, deposits are a liability to the bank (since for the bank, they are monies owed to others)