Adjustments Would Not Be Necessary If Financial Statements Were Prepared

question 185

Multiple Choice

Adjustments would not be necessary if financial statements were prepared to reflect net income from

• A) monthly operations.
• B) fiscal year operations.
• C) interim operations.
• D) lifetime operations.

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Definitions:

Excess Reserves

The amounts of cash banks hold in reserve over and above the regulatory requirements, which can influence their capacity for lending and overall liquidity in the economy.

Required Reserves

Required Reserves refer to the minimum reserve of cash that banks must hold either in their vaults or on deposit with the central bank, as mandated by financial regulations.

Total Reserves

The sum of a bank's deposits held in the central bank plus its cash on hand, serving as a buffer against potential withdrawals.

Lend Reserves

The practice by financial institutions of providing loans out of their reserves, often influencing the money supply in the economy.