T-account

Definition

A T-account is a graphical representation of a general ledger account that visually separates debits and credits. It is shaped like the letter 'T', with the account title at the top, debits on the left side, and credits on the right side.

5 Must Know Facts For Your Next Test

1. T-accounts help in organizing and summarizing financial data to ensure accuracy in accounting records.
2. Debits are recorded on the left side of a T-account, while credits are recorded on the right side.
3. In double-entry accounting, each transaction affects at least two T-accounts to keep the accounting equation balanced.
4. T-accounts are essential tools for tracing errors in accounts during audits or reconciliations.
5. They simplify complex journal entries by breaking them into visual components that are easier to understand and analyze.

Review Questions

• What sides of a T-account do debits and credits go on?
• How does using T-accounts simplify error tracing in accounting?
• Why are T-accounts useful in double-entry accounting?

Related terms

Double-entry Accounting: An accounting method where each transaction affects at least two accounts, ensuring the accounting equation stays balanced.

General Ledger: A complete record of all financial transactions over the life of a company.

Journal Entry: A record of a financial transaction entered into a journal before it is posted to ledger accounts.