T-Accounts

In basics of accounting section, the chapter Accounts explained what an account is, but what is a T-Account? It is nothing different, just because its presentation resembles the English alphabet “T”, therefore it is called T-Account. Let’s recall the definition of an account.

An account (or a general ledger account) is a unique space where all the transactions of a specific item are recorded.

It means that there is a unique space allocated for each type of asset, liability, equity, income, and expense item where their relevant transactions are recorded. For example, cash, bank balance, and vehicles are all types of assets. Should there be a single account or three separate accounts? There should be separate accounts for each one of them so that information related to each type of asset is appropriately segregated and not mixed up.

Similarly, if an entity wants to use T-accounts for recording business transactions, it will make T-accounts for each type of asset, liability, equity, income, and expense item. Let’s look at the basic components of a T-account. It usually has the following components:

  • a title and a unique account number
  • a debit side (the left side of the “T”)
  • a credit side (the right side of the “T”)
  • “Date” column at both sides of the “T” to record the date of transaction whenever it is recorded
  • “Particulars or description” column at both sides of the “T” to briefly describe the transaction
  • “Amount” column at both sides of the “T” to record the amount which is debited or credited in the T-account

Let’s take a look at the following sample T-Account to get a better picture.

Sample T-Account