What is a T-account?

Definition of T-Account

A T-account is a visual aid used to depict a general ledger account. The account title is written above the horizontal part of the "T". On the left-side of the vertical line, the debit amounts are shown. On the right-side the credit amounts are shown.

Examples for Using T-Accounts

I regularly use T-accounts when preparing adjusting entries (accruals and deferrals). I begin by drawing two T-accounts, marking one as the balance sheet account, and one as the income statement account. I then enter the current balances. The next step is to determine the amount that should be the correct ending balance for the balance sheet account. The difference between the current balance and the needed ending balance is the amount for the adjusting entry.

As a young accountant I had to determine the effect of a new FASB standard on my employer's financial statements. I reported on the impact on the company's expenses in great detail. I thought I was done until the controller drew two T-accounts on a piece of paper and noted my comments in the expense T-account, and then asked, "What about the other account? You told me about the expense account, but what other account or accounts are involved? You know we have double-entry accounting!" Thanks to his two T-accounts, I have never forgotten to consider the full impact of business transactions.

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