Question

Which of the following is true of the relationship between the drawee bank and its customer?

a. The drawee bank becomes a creditor and the customer becomes a debtor at the time of opening a checking account.
b. The drawee bank becomes an insurer and the customer the insured at the time of opening a checking account.
c. The drawee bank becomes the customer's debtor at the time of opening a checking account and agent while collecting checks.
d. The drawee bank becomes a debtor to the customer when the bank pays more than the customer has on deposit.

Answer 1

The correct relationship between the drawee bank and its customer is that the drawee bank is the customer's debtor upon opening a checking account and acts as an agent during the collection of checks.

Step-by-step explanation:

Regarding the question about the relationship between the drawee bank and its customer, option c is true: The drawee bank becomes the customer's debtor at the time of opening a checking account and agent while collecting checks. When customers deposit money into a bank account, be it a checking account, savings account, or a certificate of deposit, the bank considers these deposits as its liabilities. Essentially, the bank owes this money back to the customer upon their request to withdraw it. Thus, the bank is a debtor to the customer because it has an obligation to return the funds.