8.—3.

It will be observed that the advances have created an equal amount of deposits and notes. (c) Holders of advances lodge to their accounts £30,000 in notes, together with £40,000 in cheques, of which £20,000 is from depositors and £20,000 from other holders of advances : — Liabilities. Assets. £ £ Notes, &c. .. .. .. .. 31,000 Premises .. .. .. .. 1,000 Deposits .. .. .. .. 120,000 Gold .. .. .. .. 100,000 Advances .. .. .. .. 50,000 £151,000 £151,000 The cheques obtained from other holders of advances had no effect on the total balance-sheet figures, being merely a transfer from one holder to another, but otherwise the total assets and liabilities have decreased by £50,000 —i.e., the net decrease in advances has brought about a fall of an equivalent amount in notes and deposits. (d) The Government collects £25,000 in taxation, of which £5,000 paid in notes and balance by cheque £10,000 from deposits and £10,000 by holders of advances, the whole being lodged to Public Account:— £ £ Notes, &c. .. .. .. .. 26,000 Premises .. .. .. .. 1,000 Deposits .. .. .. .. 110,000 Gold .. .. .. .. 100,000 Government deposits .. .. 25,000 Advances.. .. .. .. 60,000 £161,000 £161,000 The increase of £10,000 in advances has put up total assets by £10,000, the remaining £15,000 representing a transfer from notes and deposits to Government deposits. (e) The Government floats loan of £30,000, of which £10,000 taken up by depositors and £20,000 by bank. £ £ Notes, &c. .. .. .. .. 26,000 Premises .. .. .. .. 1,000 Deposits .. .. .. .. 100,000 Gold .. .. .. .. 100,000 Government deposits .. .. 55,000 Advances.. .. .. .. 60,000 Government securities .. .. 20,000 £181,000 £181,000 It will be observed that the purchase of securities by the bank has created deposits to the amount involved, while the balance of the loan has resulted in a transfer of £10,000 from deposits to Government deposits. (/) The Government spends loan and revenue collected, paying out £10,000 in notes and £45,000 by cheque, of which £10,000 received by holders of advances and £35,000 by depositors, it being assumed that cheques immediately lodged for collection. £ £ Notes, &c. .. .. .. .. 36,000 Premises .. .. .. .. 1,000 Deposits .. .. .. .. 135,000 Gold .. .. .. .. 100,000 Advances .. .. .. .. 50,000 Government securities .. .. 20,000 £171,000 £171,000 As a result, Government deposits have disappeared, notes and deposits have increased by the respective amounts involved, while advances and the totals have decreased by £10,000. (g) £100,000 worth of produce sold abroad and depositors' accounts credited in New Zealand, £5,000 being added for exchange. £ £ Notes, &c. .. .. .. .. 36,000 Premises .. .. .. .. 1,000 Deposits .. .. .. .. 240,000 Gold .. .. .. .. 100,000 Sterling .. .. .. .. 100,000 Advances .. .. .. .. 50,000 Government securities .. .. 20,000 Profit and Loss Account (loss) .. 5,000 £276,000 £276,000

6