T Account – Definition

Cite this article as:"T Account – Definition," in The Business Professor, updated May 12, 2019, last accessed May 31, 2020, https://thebusinessprofessor.com/lesson/t-account-definition/.


T-Account Definition

Financial reports that use the double-entry bookkeeping method are referred to as ‘T-Account’ informally. The appearance of the book keeping entries resembles the letter ‘T’, hence the moniker. It’s a ledger account that has the account title at the top, debits on the left, credits on the right while a middle line separates the two columns, resembling a large T drawn on the page.

A Little More on What is a T-Account

Double-entry bookkeeping is a widely used ledger recording method to account for a firm’s financial transactions. Each account in the ledger gets two entries, a debit and a credit, that must balance each other out. This gives the account entries the appearance of a T, hence the informal term T-Account is sometimes used to refer to these ledgers.

All T- Accounts are considered part of the general accounting ledgers of a firm. Let’s look at an example of a sample entry in a T-account with the help of the purchases and expenditures of Macy’s. Suppose Macy’s sold Christmas hangings worth $30,000. It’s cash account will be debited with $30,000 while it’s inventory account for Seasonal Decorations will be credited with $30,000. This entry is read as the sale of goods worth $30,000 and the deduction of goods worth $30,000 from the inventory. This is how it appears in the ledger:

Seasonal Decorations Account

Debit    | Credit

 $30,000   | $30,000

This is the standard way of recording financial statements in the double bookkeeping method. Debits always to the left, credits always to the right. Debits signify increase in funds whilst credits signify deductions in the account. When taken together with all the transactions over a specific period, the ledger clearly reflects the total assets, liabilities, and shareholder equity in the financial record. Another example of T-Accounts is in the accounting of equity sales. If a company sells shares worth $1000, the T-Accounts will show an increase of $1000 in the assets column and a corresponding decrease of $1000 in the equities column.

Income statements and revenue accounts can also be recorded as T-Accounts. They follow the matching principle in accounting that states that the revenues generated must match the expenses during a given period. Adjustments entries are frequently made to make up the differences. T-Accounts also help business owners track expenditures, natures of deals, and movement of cash.

References for T-Account

Academic Research on T-Account

The mathematics of double entry bookkeeping, Ellerman, D. P. (1985). Mathematics Magazine, 58(4), 226-233. This paper sheds light on the mathematical aspect of double entry bookkeeping.

Emerging evidence of early Indian accounting, Scorgie, M. E., & NANDY, S. C. (1992). Abacus, 28(1), 88-97. This paper takes a look at the historic data available on Indian accounting practices.

Double entry multidimensional accounting, Ellerman, D. P. (1986). Omega, 14(1), 13-22. This paper explains multidimensional  double entry accounting in property rights, in physical terms with the help of vectors.

On double-entry bookkeeping: The mathematical treatment, Ellerman, D. (2014). Accounting Education, 23(5), 483-501. This paper explores the mathematical treatment of double entry bookkeeping accounting practice.

Financial reporting in the early years of the East Company India , Baladouni, V. (1986). Accounting Historians Journal, 13(1), 19-30. This paper studies archives of the East India Company’s bookkeeping practices.

Double-entry accounting: The mathematical formulation and generalization, Ellerman, D. (2007). This paper explores the mathematical models of the double entry bookkeeping method with scalars and vectors.

Utilization of Computer Software in Posting Transactions to Ledger Accounts in the Teaching of Financial Accounting in Tertiary Institutions in the North-East …, Osuala, E. C., & Adukwu, E. A. (2014). Journal of Education and Practice, 5(6), 1-6. This paper discusses the usage of software in creating T-Account entries to teach financial accounting in post secondary education in North Eastern Nigeria.

Visual Aids for Better Bookkeeping, Novitt, C. J. (1961). The Journal of Business Education, 36(4), 150-152. This paper explores the different visual aids available for improved bookkeeping.

The Problem Method in the Beginning Course, Schmidt, L. A. (1928). Accounting Review, 184-188. This paper discusses the academic problems in teaching bookkeeping to students as dry theory and sheds light on probable alternative approaches.

Do-It-Yourself Bookkeeping Practice Sets, Greco, M. Z. (1962). The Journal of Business Education, 37(7), 279-280. This paper presents a couple of data samples as practice sets to learn double bookkeeping.

Difficulties with Adjustment Columns-A Solution, Hartman, D. (1955). Accounting Review, 336-338. This paper discusses the difficulties in introducing adjustments to balance the left and right hand columns in double bookkeeping ledgers and proposes a solution.

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