Consider the following statements:
(A) In the balance sheet of a bank, loans given to the public are recorded as assets of the bank.
(B) For a bank, the main liability is the deposits which people keep with it.
(C) In the balance sheet of a bank, the reserves of the bank are recorded as its liabilities.
(D) In a bank’s balance sheet, net worth (assets minus liabilities) is recorded on the left hand side.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (A) and (B) only
(A) In the balance sheet of a bank, loans given to the public are recorded as assets of the bank. — Correct. A loan is the bank’s claim on the borrower, so it is an asset.
(B) For a bank, the main liability is the deposits which people keep with it. — Correct. The bank owes these deposits to the people who keep them.
(C) In the balance sheet of a bank, the reserves of the bank are recorded as its liabilities. — Incorrect. Reserves are the bank’s cash and its deposits with the RBI, so they are an asset.
(D) In a bank’s balance sheet, net worth (assets minus liabilities) is recorded on the left hand side. — Incorrect. Net worth is recorded on the right hand side, with the liabilities, so that both sides balance.
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. Assets are things a firm owns or what a firm can claim from others. In case of a bank, apart from buildings, furniture, etc., its assets are loans given to public. When the bank gives out loan of Rs 100 to a person, this is the bank’s claim on that person for Rs 100. Another asset that a bank has is reserves. Reserves are deposits which commercial banks keep with the Central bank, Reserve Bank of India (RBI) and its cash. …” “Assets = Reserves + Loans “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. …” |