Final answer:
The balance sheet equation states that the value of assets must equal the claims against those assets, which are the liabilities plus the net worth. This fundamental principle of accounting is reflected on a bank's T-account, where the sum of the liabilities and net worth equals the assets.
Step-by-step explanation:
On a balance sheet, the value of assets must equal the claims against those assets. A balance sheet is an accounting tool that lists both assets and liabilities, where assets represent items of value owned by the entity, and liabilities represent debts or obligations owed by the entity. The net worth, or bank capital, is the difference between total assets and total liabilities, and for a bank, it includes items such as cash in its vaults and monies at the Federal Reserve Bank.
A bank's T-account also reflects this balance, where the assets side shows what the bank holds or is owed, such as loans made by the bank and U.S. Government Securities. The liabilities side shows what the bank owes to others, including deposits made by customers. To balance to zero, net worth is included on the liabilities side, showing the financial health of the institution. Thus, assets will always equal liabilities plus net worth in a bank's balance sheet.