For a commercial bank, which of the following is treated as an asset?

Introduction / Context:
In banking, it is vital to distinguish between assets and liabilities on the balance sheet. Many exam questions check whether candidates understand that deposits collected from customers are liabilities, while loans granted to customers are assets. This question tests your understanding of how a commercial bank records its primary operations in financial statements.

Given Data / Assumptions:

• We are analysing the position from the viewpoint of the bank, not from the customer side.
• Loans and advances are funds that the bank has lent out and expects to receive back with interest.
• Customer deposits are amounts owed by the bank to depositors and can be withdrawn on demand or after a term.
• Investments made by customers in financial products are not directly assets of the bank; they are holdings of the customers.

Concept / Approach:
In accounting, an asset is a resource controlled by an entity from which future economic benefits are expected to flow to that entity. For a bank, loans and advances fit this definition because they generate interest income and the principal is expected to be repaid. Deposits, on the other hand, are obligations that the bank must repay to customers, so they are recorded as liabilities. Investments that customers make in mutual funds or other products are not owned by the bank, so they do not appear as assets of the bank.

Step-by-Step Solution:
Step 1: Consider loans and advances granted by the bank. The bank has a claim on the borrower and will receive interest, so loans are bank assets. Step 2: Consider cash deposits of customers. The bank must repay these deposits whenever customers demand, so deposits are obligations and therefore liabilities. Step 3: Consider investments made by customers in bank related products. These instruments belong to customers; the bank may earn fees, but the principal is not a bank owned asset. Step 4: Since only loans and advances match the definition of an asset for the bank, we select the option that mentions them.

Verification / Alternative Check:
If we look at a standard balance sheet of a commercial bank, we find loans and advances on the asset side and deposits on the liability side. This confirms our understanding. Customer investments are not shown as bank assets, except where the bank itself has invested its own funds in securities. The question clearly refers to investments made by customers, so these do not qualify.

Why Other Options Are Wrong:
Cash deposits of customers are liabilities because the bank owes this money to depositors and must repay it. Investments made by customers are assets of those customers, not of the bank, even though the bank may act as an intermediary. The option stating all of the above wrongly classifies liabilities and third party holdings as bank assets.

Common Pitfalls:
Many learners confuse the customer view with the bank view. For a customer, a bank deposit is an asset, but for the bank it is a liability. Always ask yourself whose balance sheet you are looking at. Another mistake is to think that any financial product offered by a bank is automatically a bank asset, which is not true unless the bank has invested its own money.

Final Answer:
For a commercial bank, the item treated as an asset is Loans and advances granted by the bank to its customers.