~T Accounts Help~

System

Can anyone explain to me the concept of T accounts. I have been doing Foundation for about 6 weeks. I have been doing some practice papers that have T Accounts in and it doesn't make any sense to me. The normal way of the Bankings on the left and Payments on the right doesnt seem to apply with these.

Can anyone help?

System

Re:~T Accounts Help~

Hello Lyagirl.

T accounts, and the double entry system are hard to get your head around at first, but it will soon fit into place.

Most people try and mirror their bank statement, as this is the only time they see double entry. But the bank is a business and you are a customer of them, so your entries have to be opposite to the statement.

Remember PEARLS, where Purchases, Expenses and Assets are debits, and Revenue, Liabilities and Sales are credits.

Remember that the entries have to be equal and opposite, i.e. if you have a debit entry of £50 for electricity, there must be a £50 credit entry (usually bank).

If you have a £500 loan paid into your bank account - you debit the bank, to show the increase in asset, and credit the loan account to reflect the liability. As you repay the loan you credit the bank (you have a decrease in assets), and debit the loan account to reflect the reduction in liability.

Hope this helps.

Scott.

System

Re:~T Accounts Help~

It does, thanks so much!