Which of the following statements about the balance sheet of a bank is NOT correct?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Deposits of the public are recorded on the left hand side as assets of the bank.
Deposits are money the bank owes to depositors. So they are its liabilities, recorded on the right hand side.
Option (1) Assets are recorded on the left hand side and liabilities on the right hand side. — True. This is the usual layout.
Option (2) Both sides of the account must balance. — True. Total assets equal total liabilities.
Option (3) Deposits of the public are recorded on the left hand side as assets of the bank. — False. Deposits are the bank’s main liability. Its assets are reserves and loans.
Option (4) If assets are greater than liabilities, the difference is recorded on the right hand side as net worth. — True. Net worth = assets − liabilities.
NCERT (2026-27): “3.3 Money Creation by Banking System … Balance sheet is a record of assets and liabilities of any firm. Conventionally, the assets of the firm are recorded on the left hand side and liabilities on the right hand side. Accounting rules say that both sides of the balance sheet must be equal or total assets must be equal to the total liabilities. …” “… Liabilities for any firm are its debts or what it owes to others. For a bank, the main liability is the deposits which people keep with it. …” “The accounting rule states that both sides of the account must balance. Hence if assets are greater than liabilities, they are recorded on the right hand side as Net Worth.” |