The Fact That Banks Operate on a "Sequential Service Constraint

question 66

Multiple Choice

The fact that banks operate on a "sequential service constraint" means that

• A)all depositors share equally in the bank's funds during a crisis.
• B)depositors arriving last are just as likely to receive their funds as those arriving first.
• C)depositors arriving first have the best chance of withdrawing their funds.
• D)banks randomly select the depositors who will receive all of their funds.

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Definitions:

Adjusting Entries

At the end of an accounting interval, journal entries are made for the allocation of profits and expenses to the time frame in which they were genuinely incurred.

Prepaid Expenses

Payments made in advance for goods or services that will be used in the future, recorded as assets on the balance sheet until they are consumed.

Accrued Salaries

Salaries that have been incurred (earned by employees) but not yet paid by the employer.

Estimated Depreciation

The projection of an asset’s decrease in value over time due to wear and use, used for accounting and tax purposes.