Final answer:
The question discusses changes in Singleton Bank's balance sheet due to a new business plan, where reserves and a loan to Hank's Auto Supply represent assets and the client deposits are liabilities. The balance sheet adheres to the accounting equation Assets = Liabilities + Net Worth, which is visually illustrated using a T-account representation.
Step-by-step explanation:
Understanding a Bank's Balance Sheet
The question centers around the impact of a business plan change on Singleton Bank's balance sheet. A balance sheet is a financial statement that presents a company's financial position, showing its assets, liabilities, and net worth at a specific point in time. In particular, for Singleton Bank, the assets consist of reserves and loans like the one to Hank's Auto Supply, while liabilities include deposits from clients. When financial activities, such as changes in loans or reserves occur, the balance sheet is updated to reflect these changes and maintain the accounting equation: Assets = Liabilities + Net Worth. In this case, Singleton Bank's balance sheet shows $1 million in reserves and a $9 million loan to Hank's Auto Supply with a total of $10 million in deposits.
A "T-account" is a visual representation used in accounting to depict the assets on the left and liabilities on the right. The use of T-accounts helps to easily understand the flow of transactions and how they affect a company's financial statements. In Singleton Bank’s example, the assets consist of $1 million in reserves and $9 million in loans, balancing against $10 million in liabilities from deposits, showing a simplified snapshot of the bank’s financial structure after enacting the new business plan.