DOC

# What is a T-Account

By Rick Rose,2014-04-06 20:06
7 views 0
What is a T-Account

What is a T-Account?

Usually I get two answers to this question.

1. Type of dinosaur; or

2. Being from the great state of Tennessee it is that thing that the University of

Tennessee Volunteers run through on Saturdays at Neyland Stadium in the fall.

A T-Account is the simplest way to describe each account in the financial records. Again the types of accounts are assets, liabilities, owner’s equity, income and expense.

A T-Account is displayed below:

Account Title

Left Side Right Side

(Debit) (Credit)

Each account has a title or name such as Cash, Accounts Receivable, Notes Payable, etc….

There are two sides to a T-Account, a “left side” and a “right side.” The left side of the T-Account is called a “debit” and the right side is called a “credit.” The terms “debit” and “credit” are derived from the Latin “debere” and “credere.”

If you remember the accounting equation (Assets = Liabilities + Owner’s Equity), those accounts on the left side of the sea-saw (See article titled “What is the Accounting

Equation?) have a “debit” balance. Those accounts on the right side normally have a “credit” balance.

Example: If you have \$1,000 in your CASH checking account it is shown as follows:

Cash

\$1,000

To increase Cash you would debit the account:

Example: If you take \$500 to the bank and deposit it into your account the T-Account

would now look like:

Cash

\$1,000

500

-----------

\$1,500

The new Cash balance is \$1,500.

To decrease Cash you would credit the account.

Example: If you write a check for \$200 for rent, the T-Account would look like:

Cash

\$1,000

500

-----------

\$1,500

\$200 _______________

\$1,300

The new balance would be \$1,300.

Report this document

For any questions or suggestions please email
cust-service@docsford.com