Final answer:
When an ADI purchases a financial instrument from a customer, its assets increase on the balance sheet, reflecting the new asset acquired. There is no direct effect on liabilities from this transaction.
Step-by-step explanation:
When an Authorized Deposit-taking Institution (ADI) purchases a financial instrument issued by a customer, such as a bond or a promissory note, it is essentially providing a loan to the customer. This transaction affects the ADI's balance sheet as follows:
- Assets increase because the financial instrument becomes a new asset.
No change occurs in liabilities in this case, as the purchase of a financial instrument does not directly affect the ADI's obligations to others.