Banking and Money Creation

Understanding Assets and Liabilities

The T-Account: Assets and Liabilities

Assets Liabilities

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.

Mr. Bargen’s T-account

House $100,000Car $10,000Playstation 4 $350

Mortgage $70,000Car Loan $5,000

The T-Account: From a Bank’s Perspective

Assets LiabilitiesMr. Bargen’s T-account

House $100,000Car $10,000Checking account at the bank $1,000Playstation 4 $350

Mortgage $70,000Car Loan $5,000

Assets LiabilitiesPinnacle Bank’s T-account

Loans $1,000,000Reserves $100,000

Deposits $1,000,000

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)