How is the accounting entry recorded by institutions that borrow federal funds___________?
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Answer: C. liability on balance sheet
Explanation
Borrowed federal funds represent short-term obligations and are liabilities. Liabilities on a balance sheet record money owed by the banking institution. Federal fund borrowings create an immediate debt obligation for the bank. Balance sheets report a firm assets, liabilities, and shareholder equity. Federal funds are overnight loans between banks to maintain reserve balances. Short-term borrowings are classified under current liabilities on statements.
Bank treasurers monitor overnight borrowings to ensure regulatory compliance. Auditors verify short-term liabilities during annual financial statement reviews. Liquidity management requires tracking federal fund transactions accurately. Income in income statement applies to revenues rather than borrowed debt funds. Expense on income statement records interest costs rather than the loan principal. Assets on balance sheet represent owned resources rather than borrowed debts.
- Subject
- Accounting and Finance
- Category
- Finance
- Topic
- —
- Difficulty
- medium
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