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T-Accounts

5 August, 2015 - 15:42

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One representation of an account is called the T-account, shown above. A T-account contains just the basic elements of the account, so it lacks the necessary detail for use in bookkeeping operations. However, it has its uses as both an illustrative tool and a quick reference.

Each account needs to have a unique Account Name, such as Cash, for ease of reference later on. In modern accounting systems, you will often see an account number alongside the name in order to facilitate report generation and computer entry. Under the bar are the debit (from the Latin debere, to owe) and credit (credere, to believe) columns.

As it shows in the example above, the balance of a T-account can be figured by first totaling each column. Second, subtract the smaller subtotal from the larger, and finally placing the total in the larger number's column.