Final answer:
A balance sheet is an accounting tool that lists assets and liabilities. For a bank, assets include reserves and loans, while liabilities consist of customer deposits. Net worth represents the bank's capital.
Step-by-step explanation:
A balance sheet is an accounting tool that lists assets and liabilities. An asset is something of value that you own and you can use to produce something, like cash or a home. A liability is a debt or something you owe, like a mortgage. The net worth is the asset value minus the liabilities, and it represents the bank's capital.
For a bank, the assets are the financial instruments that the bank holds, such as reserves and loans made by the bank. Liabilities are what the bank owes to others, such as deposits made in the bank by customers. The net worth of the bank is included on the liabilities side of the balance sheet to balance the T-account.
When bank customers deposit money into a checking account, savings account, or a certificate of deposit, the bank views these deposits as liabilities because the bank owes these deposits to its customers when they wish to withdraw their money.