Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Debit Reserves, Credit Deposits
B
Debit Deposits, Credit Reserves
C
Debit Loans, Credit Reserves
D
Debit Reserves, Credit Loans
Understanding the Answer
Let's break down why this is correct
Answer
In accounting, a T-Account is a visual tool that helps us see how transactions affect different accounts. When a bank's reserves increase, it means the bank has more cash or cash equivalents available. In this case, we would debit the reserves account because debits increase asset accounts. To balance this entry, we would also credit another account, such as the deposits account, indicating that the bank has received more money from customers. For example, if a customer deposits $1,000, the reserves account would be debited by $1,000, and the deposits account would be credited by the same amount, showing that the bank's assets have increased.
Detailed Explanation
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 reserves, which is incorrect; This option mixes up loans and reserves.
Key Concepts
debits and credits
Topic
T-Accounts and Bank Reserves
Difficulty
easy level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.