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An Account Named After the Letter T

Oluwakemi Ayoade Written by Kemmy · 1 min read >

Teaching a group of executives T-account in Corporate Financial Accounts is basic. Unspoken reaction yet loud- an executive with a wealth of experience in accounting and has acquired several professional degrees as an Accountant and Financial Analyst wondered what else needs to be thought about the T-account. Another group finds the teaching intriguing; you could see questions on their faces. Why not something that sounds more advanced in place of the Letter T which feels like teaching a pre-schooler? As simple as the name seems, the teaching is essential for a clear understanding of how financial figures are put together.

Surprisingly, many Accountants have forgotten the basics as we have lots of sophisticated Enterprise Resource Planning (ERP) system that does all accounting entries, all that is required is to fill in the necessary details on the system interface and it will pass the entries. Most Accountants have forgotten why certain entries are passed in a particular way. Only those in the teaching profession review the knowledge of T-account from time to time because it is difficult to teach account-related courses without knowing the depth of knowledge the students have about basic accounting principles. Based on this, teachers often visit this topic but may not dwell much on it depending on the feedback gotten from the class.

T -account is a tool that is used to understand individual ledger accounts and the effect of each transaction. This is called T-account because the bookkeeping entries are laid out in a way that resembles the T shape. The account title appears just above the T. The body of the account is split into two columns. The left side is a debit column, and the right side is a credit column. Transactions are posted into each T-accounts just like writing a journal entry. It teaches basic accounting principles on double entry. Here is an example of two T-account for the purchase of a vehicle at N4,000.

How we interpret the information given will determine what transactions will be posted in the T-account. For instance, the debit or credit alert received from a bank is often misinterpreted by many. The common perception is that a debit alert means the individual must pass a debit entry to replicate the same transaction in its books, forgetting that the bank is an entity and will only share its information based on how its records are kept and not from the viewpoint of the customer.

The reality is that, without a proper understanding of the double entry principles, one can not correctly review account entries and may find it difficult to detect when the Enterprise Resource Planning (ERP) systems post or interpret transactions wrongly. The T-account account guides on what to enter in a ledger. If you want to have a good understanding of accounting, I will advise that you make T-accounts your best friend.

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