T Accounts

Although it is possible to record the effect of transactions directly to the Accounting Equation, in practise we accumulate series of transactions in individual accounts.

For example all transactions involving Cash are posted to the

Cash Account.

All transactions involving Sales are Posted to the

Sales Account.

We keep a separate Account for each item.

The set of Accounts is called a Ledger.

Individual Accounts are often represented as a 'T' shape.
This makes it easy to identify the Debit entries (they are always on the left) and
Credit entries (they are always on the right).

A 'T' Account is displayed below.

T Accounts are not Solitary Creatures

Accounts do not operate alone.

In order to process any transaction we need two accounts.

We process the Debit of a transaction to one account and the Credit of the transaction to another.

We write the name of the other account alongside each entry to cross reference it so we can easily trace the two sides of any transaction.

In the example above the CASH AT BANK account has a debit entry, SALES $700, this tells us at a glance that the $700 came from a cash sale.
Similarly the SALES account would have a credit entry of, CASH at BANK $700.

Tip for Young Players
Always make sure you process both sides of a transaction before proceeding to the next one.

It is important when processing transactions to post to both accounts.
Otherwise the set of accounts won't balance, remember at the end of the day .

The Sum of all the debit accounts must equal the Sum of all the credit accounts

---