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Chapter Three FAQ Why is it a liability to the banker? Short Answer The definition of an asset is something that puts money in your pocket. The definition of a liability is something that takes money from your pocket. Since the banker must pay interest to the saver, the saver’s $100 is the saver’s asset and the banker’s liability.

Banker

Saver

INCOME STATEMENT

INCOME STATEMENT

Income

Income Interest

Expenses

Expenses Interest

BALANCE SHEET Assets

BALANCE SHEET Assets

Liabilities

Liabilities

$100 $100

FAQ How does the banker make money? Short Answer Debtors. Explanation The banking system of the world works on a system known as the fractional reserve system. 96

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