Practice Questions
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What is the primary purpose of a T-Account in accounting?
A T-Account shows how money moves in and out. Other options are incorrect because Some might think T-Accounts only track money earned; People may conf...
If a bank has total assets of $250,000 and a reserve requirement ratio of 10%, how much must the bank hold in reserves according to the balance sheet equation?
To find the reserves, multiply total assets by the reserve requirement ratio. Other options are incorrect because This answer comes from thinking 10% ...
How do transactions in T-Accounts affect a bank's reserves in terms of regulatory compliance?
Banks must adjust their reserves when they have transactions. Other options are incorrect because Some might think transactions just add to reserves w...
In a T-account for a bank, if the total debits equal the total credits and the bank's reserves increase by $500, what effect does this have on the balance sheet equation, assuming no other changes?
When reserves go up, it means the bank has more cash. Other options are incorrect because Some might think that increasing reserves means the bank owe...
In the context of T-Accounts, how does a bank manage its reserves when it processes a large deposit, considering both debits and credits?
When a bank gets a large deposit, it adds to its cash. Other options are incorrect because This answer suggests the bank is reducing its cash, which i...
What is the primary purpose of a T-Account in accounting?
A T-Account shows how every transaction affects two accounts. Other options are incorrect because Some might think T-Accounts only track money earned;...
In a T-Account, if a bank's reserves increase, which of the following would correctly represent the journal entry using debits and credits?
When a bank's reserves go up, we record this by debiting reserves. Other options are incorrect because This option suggests taking money away from res...
What are bank reserves in the context of T-Accounts?
Bank reserves are the cash that banks keep on hand. Other options are incorrect because Some might think reserves are loans; Investments might seem li...
If a bank's required reserves decrease due to a change in monetary policy, how will this likely impact its T-account?
When required reserves go down, the bank has more money to lend. Other options are incorrect because This answer suggests that assets increase without...
Which of the following statements accurately describe the implications of T-accounts for a bank's reserves and overall money supply? Select all that apply.
All the statements provided misunderstand how T-accounts and reserves work in banking. Other options are incorrect because This statement suggests tha...
If a bank's required reserves decrease while its total deposits remain constant, what is likely to happen to its ability to lend?
When required reserves go down, the bank keeps less money on hand. Other options are incorrect because Some might think that lower reserves mean less ...
What is the correct sequence of steps a bank should follow when assessing its T-accounts after a customer withdrawal?
First, the bank updates the T-account to show the withdrawal. Other options are incorrect because This option suggests checking excess reserves first;...
XYZ Bank has $1,000,000 in total deposits and a required reserve ratio of 10%. If the bank has $150,000 in actual reserves, what is the impact on its ability to lend money, and what does this indicate about their excess reserves?
The bank can lend $850,000. Other options are incorrect because This answer suggests the bank can lend more than it actually can; This option thinks t...
T-accounts : tracking assets and liabilities :: bank reserves : ?
Bank reserves help banks meet their liquidity needs. Other options are incorrect because Managing cash flow is about tracking money in and out; Intere...
In a T-account, the total amount of assets must always equal the total amount of _______ plus owner's equity.
Assets are what a business owns. Other options are incorrect because Some might think reserves are the same as liabilities; Income is money earned, no...
If a bank's required reserves decrease due to a change in regulation, what is the most likely immediate effect on the bank's ability to lend money?
When required reserves go down, the bank keeps less money on hand. Other options are incorrect because Some might think the bank needs to hold back on...
A bank has $1 million in total deposits and a required reserve ratio of 10%. After a large withdrawal of $200,000, how should the bank adjust its T-accounts to maintain compliance with reserve requirements?
The bank needs to keep a certain amount of money in reserves. Other options are incorrect because This option suggests lowering reserves, which is wro...
Master T-Accounts and Bank Reserves
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