# T-Account: Definition, Example, Recording, and Benefits

![T-Account](https://www.investopedia.com/thmb/51fifL92lcQSfvrwL4CdW0U-bj8=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/T-account-4188278_colorupdate-b2c95973b44f43efaa1d9e79e6a38e74.jpg)

*T-accounts provide a clear representation of account balances and how debits and credits relate. — Investopedia / Madelyn Goodnight*

> **Definition**
>
> A T-account is a financial record created using the double-entry bookkeeping method, in which credits and their corresponding debits are listed on opposite sides of a vertical line.

## What Is a T-Account?

In accounting, "T-account" is an informal term for a financial record created using the rules of double-entry bookkeeping. The account is a running record of credits and debits, listed on opposite sides of a line that divides the page.

The format of an account page looks like a letter "T", with the account title above a top horizontal line and debits and credits listed vertically below. [Debits](https://www.investopedia.com/terms/d/debit.asp) are listed on the left of the vertical line and [credits](https://www.investopedia.com/terms/c/credit.asp) are recorded on the right.

A T-account is also called a general ledger account.

### Key Takeaways

*   The T-account, or general ledger, is a running list of business expenses and income.
*   The T-account adheres to the rules of double-entry bookkeeping, in which every transaction is recorded twice, as a debit and a credit, on opposite sides of a vertical line.
*   In a T-account, revenues always equal expenses. 

## Understanding the T-Account

In [double-entry bookkeeping](https://www.investopedia.com/terms/d/double-entry.asp), a widely adopted accounting method, all business transactions are listed twice. The transaction is recorded as both a debit and a credit.

For example, the entry might record a sale worth X dollars on the credit side, and X dollars worth of inventory delivered to the buyer on the debit side.

The credits and debits are recorded in a [general ledger](https://www.investopedia.com/terms/g/generalledger.asp), which has a format that resembles the letter "T", with a heading at the top and credits and debits below.

A T-account consists of the following:

*   An account title at the top horizontal line of the T
*   A row of debit entries on the left of the vertical line
*   A row of credit entries on the right of the vertical line

## Example of T-Account

If Barnes & Noble Inc. sold $20,000 worth of books, it debits its [cash account](https://www.investopedia.com/terms/c/cashaccount.asp) $20,000 and credits its books or [inventory](https://www.investopedia.com/terms/i/inventory.asp) account $20,000.

This double-entry system shows that the company now has $20,000 more in cash and a corresponding $20,000 less in inventory on its books. The T-account will look like this:

![T-Account One](https://www.investopedia.com/thmb/6zJXGeXNSZQ_hfaYZy_xbl8Hk8w=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/T-Account_2-cf96e42686cc4a028f0e586995b45431.png)

**

## T- Account Recording

The major components of the [balance sheet](https://www.investopedia.com/terms/b/balancesheet.asp)—[assets](https://www.investopedia.com/terms/a/asset.asp), [liabilities](https://www.investopedia.com/terms/l/liability.asp), and [shareholders’ equity](https://www.investopedia.com/terms/s/shareholdersequity.asp)—can be reflected in a T-account. 

### Account Increases or Decreases

The debit entry on the left side of an asset account translates to an increase to the account, while a credit entry on the right side of the asset account represents a decrease to the account.

This means that a business that receives cash, for example, will debit the asset account, but will credit the account if it pays out cash. 

For the liability and shareholders’ equity accounts, debit entries on the left reflect a decrease to the accounts. Credit entries on the right signify an increase to the accounts.

The T-account for a company that [issues shares](https://www.investopedia.com/terms/i/issuedshares.asp) worth $100,000 will show an increase in its asset account and a corresponding increase in its equity account:

![T-Account Two](https://www.investopedia.com/thmb/aVXXL0AExaobW6mHL-3ixmTog6I=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/T-Account2_2-88f09021aae149ca8fce870a08ae2752.png)

**

T-accounts can also be used to record changes to a company [income statement](https://www.investopedia.com/terms/i/incomestatement.asp), where [revenues](https://www.investopedia.com/terms/r/revenue.asp) ([profits](https://www.investopedia.com/terms/p/profit.asp)) and [expenses](https://www.investopedia.com/terms/e/expense.asp) (losses) are recorded.

For the revenue accounts, debit entries decrease the account, while a credit entry increases the account. A debit entry increases an expense account and a credit entry decreases it.

## T-Account Advantages

T-accounts are commonly used to prepare [adjusting entries](https://www.investopedia.com/terms/a/adjusting-journal-entry.asp). The matching principle in [accrual accounting](https://www.investopedia.com/terms/a/accrualaccounting.asp) states that all expenses must match with revenues generated during the period.

The T-account guides accountants on what to enter in a ledger to get an adjusting balance so that revenues equal expenses.

A business owner can use a T-account as a reference, checking a transaction on a specific date or [the balance and movements of each account](https://www.investopedia.com/terms/f/footings.asp).

## Is Double-Entry Accounting Commonly Used?

[Double-entry accounting](https://www.investopedia.com/terms/d/double-entry.asp) is the standard modern method of accounting. It is the clearest way of keeping track of business expenses and income. Thus, it satisfies the basic accounting equation at a glance: assets equal liabilities plus equity.

## Is Double-Entry Accounting a Modern Bookkeeping System?

[Luca Paciola](https://www.investopedia.com/terms/a/accounting.asp), a mathematician and a friend of Leonardo da Vinci, published a book on double-entry bookkeeping in 1494.

## Is There an Alternative to Double-Entry Bookkeeping?

Single-entry bookkeeping is an alternative to double-entry bookkeeping. In the single-entry method, each transaction is listed individually in a running log of income and expenses. The single-entry method is simpler but the double-entry method is less error-prone, as the balance always reflects the real impact of every transaction.

## Why Is a Debit a Positive in an Account?

On a balance sheet, [a debit records](https://www.investopedia.com/ask/answers/04/072304.asp) an increase in the value of an asset or a decrease in an amount owed. That makes it a positive, not a negative.

## The Bottom Line

The "T" in a t-account refers to the format of a double-entry accounting system. Each transaction is recorded as both a debit and a credit on opposite sides of a vertical line. Its purpose is to create an accurate visual reference of the money flowing into and out of a business.

> **Article Sources**
>
> 1.  Zoho Books. "[Difference between single entry and double entry bookkeeping](https://www.zoho.com/books/academy/accounting-principles/single-entry-and-double-entry-bookkeeping.html#:~:text=Single%2Dentry%20bookkeeping%20is%20a,outgoing%20cash%20in%20a%20journal.)."