Basic T Accounts
T accounts are a useful bookkeeping tool used to visualize double entry bookkeeping journal entries before they are posted.
The T accounts themselves are not part of the double entry bookkeeping system, and are not used to maintain the bookkeeping records of a business. You do not have to use T accounts, but they are an aid to working out what the accounting entries are before producing a journal entry.
The T account is so called because its outline is T shaped, with debits going on the left hand side, and credits going on the right hand side. In relation to a T account debit and credit simply mean left and right and not increase and decrease.
An individual T account can be totalled to produce a net debit or credit balance, but when all accounts are added together, they should balance with the number of debits being equal to the number of credits.
While computerized accounting software operates and maintains the same system of using debits and credits to record transactions, T accounts can only be seen in a manual accounting system.
T Account Example
The easiest way to show how to do T accounts is by looking at an example. Suppose a business made a cash payment for expenses, then the T accounting would look like this.
Each T account shows the name of the account at the top (e.g Expenses), and is split into two sides. The left side is referred to as the debit side, and the right side is referred to as the credit side.
Bookkeeping Journal Entry
The corresponding journal entry for the above T account expenses example would look like this.
We have created a free T Account Template to assist in producing T accounts for your bookkeeping records.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.