Introducing the T Account

The T Account is a key part of bookkeeping, and I need to tell you about it before we start. It's very simple. I assume you know a bit about double entry so I will not go into too much detail.

Here is an example:

You can see why it is called a T Account. On the left we have debits (Dr). On this side, we put expenses, assets and drawings. On the other side, we have credits (Cr). Here we put liabilities, income and capital.

You can remember this using DEAD CLIC - Debit: Expenses, Assets and Drawings | Credit: Liabilities, Income and Capital.

Here is an example of a T Account in use:

First off, we put the date of the transaction. Then we put the account that the other side of the transaction has gone to (hence the double entry). The the 01/01/2014 credit entry of £300? You can see the other side was a debit to Website Costs.

You can see a 'B/fwd' entry at the top of £300. This is the opening balance of the account. It's simply the balance that the account last closed at. 

You can also see we have income into the bank on the Dr side, and expenses from the bank on the Cr side. Every entry on the Dr side of our bank T account will need a corresponding Cr entry somewhere else, and the Cr entries will need a corresponding Dr entry (this is why the trial balance balances!).

Finally we need to balance the T account:

This is just a case of making the two numbers at the bottom to be the same (£750 in this case). The balancing figure is called 'Balance c/fwd' and is moved to the other side under the total for the 'b/fwd' balance. Next time we write up the bank account, the b/fwd value of £400 will appear when the b/fwd of £300 is on the 01/01/2014.

Now I will begin entering some proper transactions.