Accounting




October 2, 2006

What is a T-account?

A T-account is a visual aid used to depict an account in a general ledger. Above the top portion of the T would be the account title. On the left-side of the base of the T would be any debit amounts; on the right-side would be the credit amounts.

The T-account can be helpful in determining the proper balance for an account or to determine the amount to be entered in order to arrive at a desired balance. I always use two (or more) T-accounts when determining how to adjust an account balance. Drawing two T-accounts reminds us that every transaction or adjustment will have to involve at least two accounts because of double-entry accounting.

A common use of T-accounts is in preparing adjusting entries (accruals and deferrals). I begin by drawing two T-accounts. Next, I note that one of the T-accounts will affect a balance sheet account. The other T-account is noted as affecting an income statement account.

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 said, “What about the other account? You told me about the expense account, but what other account or accounts are affected. You know we have double-entry accounting!”

You might get in the habit of using two T-accounts each time you attempt to determine the proper accounting entry. It will help you see the proper amounts and the proper accounts.






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Comments

4 Responses to “What is a T-account?”

  1. Link on October 7th, 2007 11:45 am

    On the T-Account page, why don’t you show us a T-Account and how to use it visually?

  2. marthaline on December 21st, 2007 9:30 am

    On the T-Account page, why don’t you show us a T-Account and how to use it visually?

  3. ACoach on December 21st, 2007 9:22 pm

    You can view sample T-accounts in Part 2 of our explanation of Adjusting Entries.

  4. Amber on May 28th, 2008 10:44 am

    What would a T-Account with a box on the debit side mean?

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