T-Accounts – are named for their distinctive T shape. T-accounts are used to represent general ledger accounts, allowing you to visualize how the debits and credits of a particular entry work and how they impact the financial statements. The goal of T-accounts is for debit entries to equal credit entries (this is why total assets equal total liabilities plus equity, as you will see in the Financial Statements section). For every adjustment made to the left side of a T, there must be one or more adjustments made to the right side of one or more Ts so that the net entries balance.
- Debits are always on the left; credits are always on the right
- For asset accounts, natural balance is a debit
- For liability and equity accounts, natural balance is a credit