On a bank's t-account, which are part of the banks liabilities? a. neither deposits made by its customers nor reserves b. both deposits made by its customers and reserves c. reserves but not deposits made by its customers d. deposits made by its customers but not reserves

D. deposits made by its customers but not reserves

Explanation:

According to the conceptual framework of the International Financial Reporting Standards (IFRS), a liability is an obligation, a present obligation as a result of past transaction, the settlement of which future economic benefits are expected to flow out from the entity or result in a reduction in the assets of the entity.

The focus is on the word 'obligation'.

As such, when customers make deposit in a bank, the obligation (liability) of the bank increases as the funds deposited remain that of the customer and the bank is obliged to pay the customer whenever the customer demands the funds.

The bank usually sends the customer a credit alert which is a snapshot of the banks position with the customer. This credit alert tells the customer that the liability of the bank has increased as a result of the deposit made by the customer.

A reserve on the other hand, is a retention of profit from previous financial periods. A reserve is usually added under capital in the statement of financial position as an increase in equity, thus a reserve is not a liability.

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