Which of the following can be regarded as a liability of a commercial bank?
QuestionWhich of the following can be regarded as a liability of a commercial bank?
The correct answer is B.
This question is asking which of the following options can be considered as a liability of a commercial bank. The options are: advances, deposits, treasury bills, overdrafts, and cash. A liability is something that a company owes to someone else and must be paid in the future.
Out of the given options, the correct answer is deposits. Deposits are the money that customers put into their bank accounts. Banks are required to keep a certain percentage of these deposits as reserves and can lend out the rest as loans or invest in other assets. Therefore, deposits can be considered as a liability for a commercial bank because it is money that the bank owes to its customers and must be available for withdrawal upon request.
Advances, treasury bills, overdrafts, and cash are not liabilities of a commercial bank. Advances and overdrafts are loans that the bank gives out to customers, while treasury bills are short-term government securities that banks can invest in. Cash, on the other hand, is an asset of a commercial bank because it is money that the bank holds and can use to meet its obligations.
Understanding the difference between assets and liabilities is important in accounting and finance. Assets are things that a company owns and can use to generate revenue, while liabilities are things that a company owes to someone else and must be paid in the future. To learn more about this, please read the relevant sections of the recommended textbooks.
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