Final answer:
When a company receives cash from a bank loan, its assets and liabilities increase while owner's equity remains unaffected by the transaction. The loan increases the company's cash on hand and adds a repayment obligation to its liabilities.
Step-by-step explanation:
When a company receives cash from a bank loan, it affects the company's financial statements as follows:
- Assets: Increase, because the cash balance of the company goes up.
- Liabilities: Increase, as the company now has an obligation to repay the bank loan.
- Owner's Equity: No effect directly from the transaction, as owner's equity is not impacted by the loan itself (though subsequent profits or losses from the use of funds could alter this).
Considering Singleton Bank's balance sheet as an example, when Singleton lends $9 million to Hank's Auto Supply, it records the loan as an asset, which demonstrates the concept that loans given out increase assets. Here, the bank's assets and the liabilities of Hank's Auto Supply both increase.