Question

Briefly explain whether you agree or disagree with the following​ statement: ​"AssetsLOADING... are things of value that people own. Liabilities are debts.​ Therefore, a bank will always consider a checking account deposit to be an asset and a car loan to be a​ liability."
A. Disagree. Checking accounts represent something that the bank owes to the owner of the account. It is a bank liability.
B. Disagree. Both checking accounts and car loans represent bank liabilities.
C. Agree. Loans are debts and therefore bank liabilities.
D. Agree. Checking accounts are something of value that is in the bank.​ Therefore, they are a bank asset.

Answer 1

Answer:

A. Disagree. Checking accounts represent something that the bank owes to the owner of the account. It is a bank liability.

Explanation:

Given the definitions of liabilities and assets, it is also important to distinguish the point of view when discussing whether a specific item is an asset or liability.

Since a checking account represents money bank users deposit into the bank, that means that the bank owes the money deposited to the bank customer.

Similarly, a car loan is a bank asset. It is an essential bank product representing the money lent to someone. That means bank users owe the bank in that case. Although the bank doesn't possess the loan money after providing someone with a loan, the loan money will be returned to the bank after some time (representing the key asset characteristic).