Final answer:
The statement about kiting is false because kiting is an illegal activity that manipulates the appearance of assets on a balance sheet, not a legitimate transfer of money.
Step-by-step explanation:
The statement is false. The transfer of money from one bank to another with the intention of making the funds appear as an asset when they have not been cleared or settled in the receiving account is referred to as kiting. This is an illegal activity. It essentially involves taking advantage of the time it takes for checks to clear to create the illusion of having more money in accounts than is actually available. This is akin to an asset-liability time mismatch in which a bank's short-term liabilities—such as customer deposits that can be withdrawn at any time—do not match its long-term assets—like loans, which are paid back over a longer period.
In banking, a balance sheet is an essential accounting tool that lists a bank's assets and liabilities and facilitates the understanding of its bank capital, which is essentially the bank's net worth. Kiting inflates a bank's assets falsely and could dangerously misrepresent a bank's financial health.