Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

Which of the following is a defining characteristic of a fractional reserve banking system?

Banks must keep 100% of deposits on hand at all times.

Banks are required to keep only a portion of deposits as reserves and can lend out the remainder.

Banks can issue currency without any regulatory oversight.

Banks are prohibited from making loans to customers.

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Verified step by step guidance

Understand the concept of a fractional reserve banking system: In this system, banks are required to keep only a portion of their deposits as reserves, while the remainder can be lent out to borrowers. This is a key feature that distinguishes it from other banking systems.

Eliminate incorrect options: Review each option provided in the problem and identify which ones do not align with the definition of a fractional reserve banking system. For example, the option stating that banks must keep 100% of deposits on hand is incorrect because it contradicts the fractional reserve principle.

Focus on the correct characteristic: The defining feature of a fractional reserve banking system is that banks are required to hold a fraction of deposits as reserves, not the full amount. This allows them to lend out the remaining portion, facilitating credit creation in the economy.

Consider regulatory oversight: Fractional reserve banking systems operate under regulatory frameworks that ensure banks maintain the required reserve ratio. This prevents excessive lending and ensures financial stability.

Confirm the correct answer: Based on the analysis, the correct answer is the option stating that banks are required to keep only a portion of deposits as reserves and can lend out the remainder. This aligns with the defining characteristic of a fractional reserve banking system.