Final answer:
Net worth is calculated by subtracting total liabilities from total assets. For banks, assets include reserves and loans, while liabilities consist of customer deposits. A T-account visually represents a firm's assets and liabilities, with net worth ensuring balance.
Step-by-step explanation:
Your net worth is the sum of all of your assets minus all of your liabilities. In the context of a bank, assets might include financial instruments such as reserves, loans made, and U.S. Government Securities. Liabilities refer to what the bank owes to others, like deposits made by customers. If a bank has more assets than liabilities, it has a positive net worth. Conversely, if liabilities exceed assets, the bank has a negative net worth. The concept of net worth is critical in understanding the financial health of an institution. A 'T-account' is a visual representation used to display the assets and liabilities of a firm, with net worth included on the liabilities side to balance the account to zero.