T Accounts is a capital T format that is used to present the accounting general ledger accounts. Usually, the T account is not the size of the normal T, but it is a big sketch that fits in a whole page or so. When preparing accounting information in a T Accounts, there some guidelines that need to be followed, this requires the title of the account, the debit and the credit side. Usually, in the preparation of accounting transaction, two T Accounts are drawn for a single transaction. T Accounts are important when preparing
Features of T Accounts
T Accounts have several features that distinguish them as T Accounts. Firstly, is the drawing that looks like a big T. many accounts are prepared and different accounts have different formats, but for the T account, the format is a horizontal line on the top and a vertical line, which runs down way and touches the horizontal line therefore forming a capital letter T. T Accounts have two sides, the left side is referred as the debit side and the right side is the credit side. Entry of transaction in either side that is the debit or the credit side is determined by the accounting rules for real accounts, personal and the nominal accounts. T Accounts must have the names of the account for instance the sales account. They must also contain the period the account was prepared or resembles and more importantly the name of the organization.
Concepts of a T Accounts
T Accounts are created to represent or enter the financial transaction. T Accounts are drawn for different transaction that takes place in an organization. Every type of transaction requires it own T Accounts to enter the information in. for example, a cash transaction will require an accountant to open cash T Accounts and debtors will require their own T Accounts. Generally, there are many transactions that occur in a day in a business mostly if the business is a big organization. Therefore, it would become difficult and cumbersome for the accountant to open up T Accounts for all the transaction entries. To reduce the amount of one an accountant has to do, it is advisable that the information for the transaction be interested in the general ledger account before drawing up T Accounts for each and every ledger. From the general ledger, the information is transferred to specific ledger accounts. In accounting, there is a general rule that requires a double entry for every transaction that takes place. For example, if a customer buys good on credit from the business, two entries need to take place, which are; entry in the stock account showing the goods have reduced and entry in the debtors account to show the debtors have increased. For these transactions, they correspond to the relevant T Accounts affected by the transaction. The entries may occur in one side that is either debit or credit or a transaction may be made that affects both sides at the same time.
Balancing off of figure in the T Accounts
T Accounts must show the balance the account at the end of each accounting period. The closing balance may be a debit balance or a credit balance depending on the type of account. Balancing off of figure in the T Accounts requires the addition of amounts in both sides. The amount with fewer amounts is subtracted from the side with more amounts and the difference is determined. Then the difference is first written on the side with fewer amounts accompanied by the words balance carried down (c/d) or balance brought down (b/d) and then it is added up to reflect the same value as of the side with larger amounts. After the total in the side with larger amount, the difference is written together with the words balance brought forward (b/f) or balance carried forward (c/f). After doing that the T Accounts are complete.
Conclusion in the T Accounts
T Accounts are important in the day to day business because they are used to enter all the business transactions that take place. The main benefit of T Accounts is that they are simple to use. However, every transaction that occurs need to be entered, which might seem to be a lot of work of opening each transaction T Accounts.