Question

Suppose you repay a $100 loan from City National Bank (CNB) by writing a check from your CNB checking account. Use the T accounts to show the effects of this transaction on you and the CNB. How much has your wealth changed as a result of this transaction

Answer 1

T accounts shows additions & subtractions (debit & credits) to the account, in individual accounts resembling 'T' shape.

Step-by-step explanation:

Repaying Loan from CNB by CNB check account :

Loan is a liability, its increase balance is credit. So, paying off loan decreases the loan, hence Loan T a/c is Debited

Bank Balance is an asset, its increase is debit. So, paying off loan by bank checking account decreases bank balance, hence Bank ac is Credited