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Banking and Money Creation

Banking and Money Creation. Understanding Assets and Liabilities. The T-Account: Assets and Liabilities. Mr. Bargen’s T-account. Assets. Liabilities. House $100,000 Car $10,000 Playstation 4 $350. Mortgage $70,000 Car Loan $5,000.

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Banking and Money Creation

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  1. Banking and Money Creation Understanding Assets and Liabilities

  2. The T-Account: Assets and Liabilities Mr. Bargen’s T-account Assets Liabilities House $100,000 Car $10,000 Playstation 4 $350 Mortgage $70,000 Car Loan $5,000 • A T-account keeps track of an individual’s or business’s assets and liabilities: • assets (the things of value) on the left and • liabilities (amounts owed to others) on the right.

  3. The T-Account: From a Bank’s Perspective Mr. Bargen’s T-account Assets Liabilities House $100,000 Car $10,000 Checking account at the bank $1,000 Playstation 4 $350 Mortgage $70,000 Car Loan $5,000 Pinnacle Bank’s T-account Assets Liabilities Deposits $1,000,000 Loans $1,000,000 Reserves $100,000 Notice that while bank deposits are an asset for Mr. Bargen, deposits are a liability to the bank (since for the bank, they are monies owed to others)

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