Question

Show these assets/liabilities in T accounts of the Federal Reserve, Bank A, Bank B, US Treasury and the General Public. Each entry should appear at least twice across T accounts of those institutions.

- Cash

- Reserves

- Deposits

- Bank Capital

- Discount Loans

- Consumer Loans

- Federal Funds Loans by Bank A to Bank B

- Treasury Bonds

Answer 1

T account is the financial records that uses double entry book keeping. Appearance of entries of book keeping is that, larger T account created by putting name on top of account, entry posted on left side called as debit side and entry posted in right side known as credit side.

T account known as ledger account. In double entry bookkeeping, financial transactions considered to affect two accounts. One will get debit entry while other get credit entry.

1. Cash

Debit side on Cash in T account represent increase in asset whereas credit side represent decrease in cash in all those institute.

2. Reserves -in T account

Credit side of reserve on T account shows increase in reserves i.e general reserve, special reserve and debit side of T account of reserve show decrease in reserve.

3. Deposits

Deposit on T account of banks represent deposit accepted from public. Debit side shows increase in deposits i.e increase in liabilities where as credit side shows decrease in deposit.i.e decrease in liabilities.

4. Bank capital

On T account. Credit side shows increase in bank capital and debit side of Capital account of bank decrease in capital.

5. Discount loan

It is an expense for bank. Debit side represent increase in expenses and credit side represent decrease in expenses in T account.

6. Consumer loan

In bank consumer loan means loans provided by bank to customer. Debit side of T account shows increase in loan i.e increase in assets and credit side decrease in loan.

7. Federal loan by bank A to Bank B

bank A shows that loan to bank B as a T account or ledger account , where Debit side represent increase in Asset i.e increase in loans to bank B and credit side shows decrease in loans.

Bank C shows in T account of loan from bank A , as debit side increase in liabilities i.e loans and credit side shows decrease in liabilities i.e loans repaid.

8. Treasury bond-

Investment in bond represents the asset of bank.

Debit side increase and credit side decrease of asset in T account.