T Accounts

 T accounts are what ledger accounts might look like if they were kept on paper (as opposed to using computer software). 

They are nothing mysterious, drawn on paper, a T account is quite literally a large T!  The title of the ledger (for example, “motor expenses” is written across the top), debit entries against that account are written on the left hand side of the vertical line and credit entries are written on the right hand side.

At the end of an accounting period, a balance is calculated for each T account.  All this means is that all the debit entries are added up and the total recorded at the bottom (on the left, as that’s where all the debit entries are) and all the credit entries are similarly totalled on the right hand side.

If the total debits exceed the total credits, then there is said to be a debit balance on that account. 

T accounts are the building blocks of accounting and sometimes, it’s helpful to consider going back to basics and professional bookkeepers and accountants sometimes do go back to drawing up T Accounts if things don’t balance as they should.

However, if you use an accounting software package and/or an accountant, it’s perfectly possible that you will never come across a T account.  Some accouting software does make reference to T accounts, particularly those aimed for use by accountants and specialised accounts departments.

Advertisements

Comments are closed.