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    Lesson 3.3: T-Accounts

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    Jamiella
    A T-account is used to summarize transactions affecting an accounting element. It has three parts - the top for the account title and left and right sides for debit and credit entries. Debits record increases in asset and expense accounts, while credits record increases in liability, owner's equity, and income accounts. Every transaction must have equal debits and credits to follow double-entry bookkeeping. T-accounts make it easy to track increases and decreases for each account over time.

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    Lesson 3.3: T-Accounts

    Uploaded by

    Jamiella
    46 views3 pages
    A T-account is used to summarize transactions affecting an accounting element. It has three parts - the top for the account title and left and right sides for debit and credit entries. Debits record increases in asset and expense accounts, while credits record increases in liability, owner's equity, and income accounts. Every transaction must have equal debits and credits to follow double-entry bookkeeping. T-accounts make it easy to track increases and decreases for each account over time.

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    T-ACCOUNT

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    A T-account is used to summarize transactions affecting an accounting element. It has three parts - the top for the account title and left and right sides for debit and credit entries. Debits record increases in asset and expense accounts, while credits record increases in liability, owner's equity, and income accounts. Every transaction must have equal debits and credits to follow double-entry bookkeeping. T-accounts make it easy to track increases and decreases for each account over time.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    46 views3 pages

    Lesson 3.3: T-Accounts

    Uploaded by

    Jamiella
    A T-account is used to summarize transactions affecting an accounting element. It has three parts - the top for the account title and left and right sides for debit and credit entries. Debits record increases in asset and expense accounts, while credits record increases in liability, owner's equity, and income accounts. Every transaction must have equal debits and credits to follow double-entry bookkeeping. T-accounts make it easy to track increases and decreases for each account over time.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    Lesson 3.

    3: T-Accounts

    Lesson Summary
    An account is individual accounting record of all the increases and decreases of a specific item
    of one of the elements.

    The T-account is a tool used to summarize all the movements that occurred on a certain element.
    It derives its name from the shape it forms, which is divided into three parts. The topmost part is
    reserved for the account title, the left side as the debit, and the right side as the credit.

    Discussion

    The T Account
    It is the simplest tool used to analyze the effects of the transactions on each account, hence it
    has two sides: one side for recording increases and the other side for recording decreases. Its
    shape comes from the letter T which is the reason why it is called a T Account. The left part of
    the T Account is called the debit side and the right part is called the credit side. The title of the
    account is placed on top. There are as many T accounts corresponding to each of the elements.
    To illustrate, the Cash T account will look like this:

    Cash

    Left Side or debit side Right side or credit side

    When an amount is to be recorded on the left side, we simply say debit cash and when it is to be
    recorded on the right side, we say credit cash. Debit is an accounting term which simply means
    left side of an account while credit simply means the right side of an account.
    Some accounts are increased on the debit side while other accounts are increased on the credit
    side depending on its position in the accounting equation:
    Assets = Liabilities + Owner’s Equity

    Since the assets are on the left side or debit side, increases are therefore on the debit side and
    decreases are on the credit side. Since liabilities and owner’s equity are on the right side or credit
    side, increases therefore are on the credit side and decreases are on the debit side. Thus:

    ASSETS

    Debit Credit
    (+) (-)

    LIABILITIES

    Debit Credit
    (-) (+)

    OWNER’S EQUITY

    Debit Credit
    (-) (+)

    To summarize, the following rules for debit and credit should be observed in processing
    transactions:
    1. Increases in assets are recorded on the debit side of the account while decreases in
    assets are recorded on the credit side of the account.
    2. Increases are recorded on the credit side of the account while decreases in liabilities are
    recorded on the debit side of the account.
    3. Increases in owner’s equity are recorded on the credit side of the account while decreases
    in owner’s equity are recorded on the debit side.
    Account Title

    Debit Credit
    (Assets and (Liabilities,
    Expenses) Owner’s Equity,
    and Income)

    Assets and expenses have a normal balance of debit while liabilities, equity, and income have a
    normal balance of credit.

    The Venetian Model


    Take note that every transaction entry must have a debit equal to a credit no matter how many
    accounts are affected. This is called the Double entry Bookkeeping System or Venetian Model
    which was introduced by Fr. Luca Pacioli. The transaction must always affect two accounts and
    at the least one or two accounting elements. The reason is that a transaction is an exchange of
    value: one value received and another value parted with.

    Since increases and decreases are accumulated for each particular account, at any point of time
    the balances of each could be determined. The difference between the debit total and credit total
    is called an account balance. If the debit total is higher than the credit total, the account balance
    is called a debit balance. If the credit total is higher than the debit total, the account balance is
    called a credit balance. Normally, the assets, owner’s drawing, and expense accounts have debit
    balances while liabilities and owner’s capital have credit balances.

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