Question

When a bank borrows funds from another banks.what two accounts on the borrowing bank’s balance sheet are affected and how

Answer 1

Two accounts affected in banks balance sheet are-

1. Loan from Bank Account - Laibility - Credit balance in this account will increase as bank has borrowed money.

2. The other account that will be affected is(Based on assumption) -

a. Balance with bank Account - Asset- Debit balance - as the amount borrowed is still in a bank account from whom it is borrowed.(Assumption- If amount has not been used / witdrawn from loan account).

b. Creditors Account - Libilities - credit balance will be reduced- ( Assumption if the amount of loan is used to pay earlier liabilities).