T Accounts
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T-accounts are ledger accounts that visually represent transactions with debits on the left side and credits on the right side. They contain the account title at the top and are used to calculate account balances by totaling debits and credits, with debit balances occurring when total debits exceed credits and vice versa. T-accounts form the basic building blocks of accounting by requiring every transaction to involve at least two accounts and allowing users to see how debits and credits are matched between accounts.
T Accounts
- 1. What are they? T-Accounts
- 2. T accounts are what ledger accounts might look like if they were kept on paper (as opposed to using computer software). help analyze transactions, one crosses through the T account amounts with matching debits and credits.
- 3. Mysterious? Drawn on paper, a T account is quite literally a large T!
- 4. What does a T Account Consist of? The title of the account The left hand side to record debit entries for the account The right hand side to record credit entries for the account Example: CASH Debit (Left Side) Credit (Right Side)
- 5. At the end of an accounting period, a balance is calculated for each T account.
- 6. What does it mean to calculate a balance? Does this account have higher debits or credits? Total the debit entries (left side) Total the credit entries (right side) What type of balance is it? Debit balance – the total debits exceed the total credits Credit balance – the total credits exceed the total debits Example: CASH $1000.00 $1250.00 $ 750.00 $ 800.00 $1200.00 $1,000.00 This account has a debit balance as total debits of $3,000 exceed total credits of $2,000
- 7. In Summary, T accounts: are the building blocks of accounting can be helpful in determining the proper balance for an account remind us that every transaction or adjustment will have to involve at least two accounts allow you to visualize how the debits and credits of a particular entry work