T-Accounts

Definition

T-Accounts are a visual representation of accounting transactions that show the flow of debits and credits. They are called "T-Accounts" because they resemble the letter "T", with debits on the left side and credits on the right side.

Analogy

Imagine a T-shirt with two sides - one side represents debits and the other represents credits. As you make transactions, you add or subtract items from each side, just like filling up or emptying pockets on your shirt.

Related terms

Liabilities: Liabilities are debts or obligations that a company owes to others. They can include loans, accounts payable, or accrued expenses.

Assets: Assets are resources owned by a company that have economic value. Examples include cash, inventory, equipment, and buildings.

Equity: Equity represents the ownership interest in a company after deducting liabilities from assets. It is also known as net worth or shareholders' equity.