When a check is cleared against Bank A after being deposited at Bank B,_____.

A) both Bank A's and Bank B's liabilities increase
B) both Bank A's and Bank B's liabilities decrease
C) Bank A's liabilities increase and Bank B's liabilities decrease
D) Bank A's liabilities decrease and Bank B's liabilities increase
E) there is an increase in the liabilities of the Federal Reserve

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Carissa Parham · Accepted Answer

Final Answer : D, Explanation :  When a check is cleared, Bank A (the payer's bank) sees its liabilities decrease because it pays out the amount of the check, reducing the account balance of the payer. Bank B (the payee's bank) sees its liabilities increase because it credits the payee's account with the amount of the check, increasing the payee's balance.

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