Final answer:
Liabilities are the debts or obligations a practice owes, and in a T-account, they are listed on the right side, balancing against assets and net worth. A bank's T-account will show assets that can include cash reserves and loans made, with liabilities including customer deposits, ensuring total assets equal the liabilities plus net worth.
Step-by-step explanation:
Liabilities are amounts owed by the practice to others, and in the context of a T-account, they are recorded on the right side.
The T-account is an accounting tool that visually represents the financial position of a practice, separating assets on the left, which are valuable resources owned by the business, from its liabilities and net worth on the right.
Assets of a bank, for example, may include reserves, loans made by the bank, and U.S. Government Securities, whereas liabilities include deposits made by its customers that the bank owes back.
The net worth or bank capital is calculated as total assets minus total liabilities and is included on the liabilities side of the T-account to ensure that it balances to zero. For a healthy business, this net worth will be positive, whereas for a bankrupt firm, it would be negative. Regardless of the health of the business, assets will always equal liabilities plus net worth on a bank's T-account