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banking accounting balance-sheet

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March 15, 2025 Score: 7 Rep: 32,101 Quality: Expert Completeness: 50%

A "cash deposit" is not solely a liability for a bank. Rather, the cash (currency and equivalents) is the asset for the bank, and the deposit (an IOU to a depositor, i.e. a bank customer) is the liability for the bank. That way, everything balances the way it is supposed to under double-entry accounting — on the bank's balance sheet. (Once the cash has been deposited, the bank can then put the cash to use to, say, make loans or purchase securities, and so overall cash on hand will rarely equal overall deposits.)

Bank deposits are assets from the depositor's (bank customer's) perspective. A customer of the bank would carry the deposit as an asset on their balance sheet, offset either by a liability or owner's equity on the other side of their balance sheet.

It can be a bit more complicated from the bank's perspective, because a bank can itself be a depositor (customer) at other banks.

Download a bank's annual report to see this on a real bank's balance sheet. Here's an example from Bank of Montreal's 2023 annual report on page 67:

Consolidated balance sheet for BMO for 2023

March 15, 2025 Score: -1 Rep: 1,207 Quality: Low Completeness: 20%

The cash deposited to a bank is also an asset from the bank’s perspective, but it is not isolated as “deposit cash” on the asset side when reported because it gets pooled along all of the other cash the bank gets from other sources and, from the bank’s perspective, the source of the cash once taken in makes no difference.

In addition, eventually most of the deposited cash will be used for other purposes such as lending or purchasing securities and these will be pooled among themselves which would make it even harder to isolate portions of these assets as “deposit lending” or “deposit securities” and even if tried, it would not be really useful either.