Question

The local branch of the Universal Bank System (UBS) receives money from depositors and lends it to borrowers. Which of the following would be true about UBS's financial statements?

Group of answer choices

UBS reports deposits as liabilities and loans as assets.

UBS reports deposits as assets and loans as liabilities.

UBS reports both deposits and loans as assets.

UBS reports both deposits and loans as liabilities.

Answer 1

Ans - UBS reports deposits as liabilities and Loans as assets (OPTION 1)

This is so because applying the basic concept of Assets and liabilities we know that Assets are something used to invest and utilize for production or any other purpose with primary motive of earning income whereas Liabilities are debts which is to be paid back and may also include Interest or other similar charges.
Using the concept mentioned above if we look from UBS's point of view, Deposits are what it receives from public which it has to return to them whenever asked as well as it has to pay some interest on their deposits as well making DEPOSITS a LIABILITY for UBS.
Loans are something which it extends to outside borrowers which it expects to be returned with the stipulated time along with some interest which is UBS's earnings for extension of loans making LOANS ASSTES for the UBS.