📚 Learning Guide
T-Accounts and Bank Reserves
easy

In a T-Account, if a bank's reserves increase, which of the following would correctly represent the journal entry using debits and credits?

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
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Choose 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

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