When you deposit $50 in a bank, the bank's assets:

Question

BlackTom AI · Accepted Answer

Banks record physical cash and reserves as assets and customer deposits as liabilities, so receiving $50 in cash raises assets and raises liabilities by the same amount.

1. Relevant concepts
- A bank’s balance sheet: Assets (cash, reserves, loans, securities) = Liabilities (deposits, borrowings) + Equity.
- A deposit of cash increases the bank’s asset “cash (or reserves)” and simultaneously increases the bank’s liability “customer deposits.” Net worth (equity) does not change.

2. Step-by-step reasoning
- You hand the bank $50 in cash. The bank adds $50 to its cash/reserves asset account.
- The bank credits your deposit account by $50, which raises its deposit liabilities by $50.
- Because both an asset and a liability rise by $50, total assets increase by $50 and total liabilities increase by $50; equity is unchanged.

3. Intermediate calculation / T-account view
Before:
 Assets = A
 Liabilities = L
Change:
 Assets: +$50 (cash/reserves)
 Liabilities: +$50 (deposit)
After:
 Assets = A + $50
 Liabilities = L + $50
Net change in equity = (A+50) - (L+50) - (original equity) = 0

4. Why the correct answer is correct
- The deposit adds a new asset (cash held by the bank) equal to $50; therefore assets increase by $50. The simultaneous liability entry (the deposit) matches the asset increase, so the bank’s total assets rise by the deposit amount.

5. Why the other options are incorrect
- b. “cash items in process increase by $50”: Cash items in process usually refer to checks or items pending settlement, not a direct cash deposit; a direct cash deposit goes to cash/reserves, not “cash items in process.”
- c. “reserves decrease by $50”: Reserves increase (if cash deposited into the vault or reserves at the central bank), not decrease.
- d. “decrease by $50”: Assets do not decrease when the bank receives cash; they increase.

Conclusion: Total assets increase by $50, so the correct choice is (a) increase by $50, matching the provided answer.

When you deposit $50 in a bank, the bank's assets:Single choice

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