T Account meaning and how it works

T account

Meaning of T Account

A T-account is a colloquial name for a collection of financial records that employ double-entry accounting. The word refers to how the bookkeeping entries appear. First, a vast letter T is drawn on a piece of paper. The account title is then typed directly above the top horizontal line, followed by debits on the left and credits on the right, separated by the vertical line of the letter T.

 

HOW TO USE T ACCOUNTS

All financial transactions are considered to affect at least two of a company’s accounts in double-entry bookkeeping, a popular accounting method. One account will receive a debit entry to record each transaction, while the other will receive a credit entry.

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T ACCOUNT TEMPLET

T Account

AN EXAMPLE OF HOW TO USE A T-ACCOUNT:

 

TYPE OF ACCOUNT TO INCREASE BALANCE TO DECREASE BALANCE
Assets: Cash, accounts receivable, inventory, furniture, and computers are all assets Debit Credit
Liabilities: Accounts payable, notes payable, and bank loans are all liabilities Credit Debit
Revenue: Money you receive from customers for goods or services provided is considered revenue Credit Debit
Expenses: Rent, payroll, office supplies, insurance, postage, and utilities are all expenses Debit Credit
Capital/Owner Equity: This represents the financial interest in the business of all owners and investors accounted for Credit Debit

 

Cash:

Debit Credit
 

 

 

Expanse:

Debit Credit