T-Accounts
A T-account is a very useful tool used in accounting to keep track of all the transactions that affected a certain account type. We use t-accounts to balance accounts, determine what the balance of an account is in order to prepare financial statements and a variety of other reasons.
Characteristics of a T-Account
- Left side: debit; Right side: credit
- Normal beginning and ending balances should be placed on the "natural" side of the account.
- Debit for: assets and expenses
- Credit for: liabilities, shareholders' equity and revenues
- When a journal entry is written, the amounts in the entry are also placed in the T-accounts.
Example: T-Accounts
Use T-Accounts to find the balances on January 31 of the following accounts: Cash, Accounts payable, Inventory and Sales revenue.
Assume these are the only transactions that took place in January
