T Accounts

T Accounts – the essence

T Accounts are a great way of General Ledger accounts visualization. T Accounts have their names due to the form of visual presentation, i.e. T form.

Each General Ledger account is presented in the T form, which has:

• Name of account
• Left side, which is Debit side
• Right side, which is Credit side

Usage of T account is a very good way to visually explain double entry accounting principle, where each transaction always has 2 entries:

Debit and Credit

T Accounts also help accountants to better understand complex, complicated transactions and their impact on different general ledger accounts.

T Accounts – example

In order to understand the essence of T account, the following example is used:

The company buys inventory on account for 1,000 $, i.e. inventory is acquired on credit, and payment will be done later within the terms agreed with the supplier

The following accounting entry to be posted:

D Inventory 1,000$

C Accounts Payable 1,000$

Here is how this transaction is presented in the T accounts, where each account has its name:

Debit in the Inventory account is on the left side, and

Credit on Accounts Payable account in on the right side