A Depository Institution's Profit Is Derived from the Difference Between

question 105

Multiple Choice

A depository institution's profit is derived from the difference between:

• A)the interest rate it receives on loans and the rate it receives on investments in government securities.
• B)the interest rate it pays on deposits and the rate it receives on loans.
• C)its primary deposit and its derivative deposit.
• D)its assets and its liabilities.
• E)the interest rate it receives on domestic loans and the rate it receives on Eurodollar loans.

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Definitions:

Adjusting Entry

An entry made in the accounting records at the end of an accounting period to allocate income and expenses to the period in which they actually occurred.

Interest

The charge for the privilege of borrowing money, typically expressed as an annual percentage rate.

Allowance Method

An accounting technique used to estimate and account for bad debts, allowing a company to anticipate and reduce accounts receivable to a more realistic value.

Accounts Receivable

Money owed to a business by its customers for goods or services delivered but not yet paid for.