Moss County Bank agrees to lend the Sadowski Brick Company $500,000 on January 1. Sadowski Brick Company signs a $500,000, 6%, 9-month note. The entry made by Sadowski Brick Company on January 1 to record the proceeds and issuance of the note is
Cash 500,000
Notes Payable 500,000
Deposits are not "lent out" by banks. When they lend, they "make fresh money out of nothing." Each loan's total value is equal to the quantity of newly minted money. The only people to whom banks "lend out" reserves are one another.
As a means of raising money, your lender might also sell your debt. Banks really sell the servicing rights to borrowers when they sell loans. This releases credit lines and enables lenders to disperse funds to additional borrowers (and make money on the fees for originating a mortgage).
Learn more about banks process here
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