T accounts explained

T accounts are awesome! T accounts are the most useful tool in accounting. T accounts are fundamental to your understanding of accounting. T accounts are helpful in solving any accounting problem. T accounts are spectacular! OK, that’s enough praise for T accounts. Let’s get to work. How do you master T accounts? By taking four simple steps. Stay with me, and let’s get this done!

⏱️TIMESTAMPS⏱️
0:00 Introduction to T accounts
0:29 T account definition
0:41 T accounting in 4 steps
2:50 T accounting example
4:20 T account opening and ending balance
5:02 T accounts summary

Here’s a very simple definition of a T account: a T account is a visual representation of an account, to think through the journal entries you are going to make to record transactions.

T accounting step two: take a look at this T account and this balance sheet. Looks pretty similar, right? That’s because it’s the same basic idea. Debits on the left, credits on the right.

Asset accounts in their “natural state” have a debit balance, liabilities and equity accounts in their “natural state” have a credit balance. You can think of a T account as a mini balance sheet, for one specific account in the ledger.

Assets go up if you add debits, and down if you book credits. Liabilities and equity go up if you add credits, and down if you book debits.

Here’s a little secret shortcut that very few people realize: the two types of income statement accounts revenue and expense are essentially just a subset of equity. Revenue accounts in their “natural state” have a credit balance, at the end of the accounting period they will roll up into equity and make it grow. Expense accounts in their “natural state” have a debit balance, at the end of the accounting period they will roll up into equity and make it shrink. If revenue is higher than expenses, you generate a positive net income, which adds to the equity balance.

T accounting in four steps:
3) For every journal entry, decide first which type of account you need, and then which specific account in that category
4) To calculate the ending balance for an account, add up the opening balance and the debits and credits for the period.

Philip de Vroe (The Finance Storyteller) aims to make strategy, #finance and leadership enjoyable and easier to understand. Learn the business and #accounting vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better investing decisions. Philip delivers #financetraining in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!

[jffernandezp_]

This man is clutching up the eaxm that I have tomorrow, great video

[christianh.riiser]

Excellent explanation of T-accounts - Keep up the good work Phillip ! - I really enjoy your videos - they are both educational and funny !!!

[edwardhary]

Thank you man you taught a whole 2 hour lecture in 5 minutes

[tajlika]

Hello!
Thank you for the video, and explanation of T-accounts as well. I would like to hear it in a bit slower way. Will be gratefull 😌 But in common very easy to understand. Well done!

[konstancyja]

Amazing and motivational!
I have downloaded your wallpaper on my phone - great idea!
The the forklift is quite expensive :D that shall be a big chocolate :D

[kauverymunshi]

Wow! T account ❤ I am from medical line, but get job bookkeeper, but learning your accounts, ❤

[brandonpope]

GREAT EXPLAINATION, AND VERY CLEAR! THANKS =-)

[thefinaldasher]

Thanks for the tutorial, this helped in a work

[smrenterprisesbuildingmate]

Thank q very much. Ur so simple and perfect sir.

[kentsqueezy]

I always see this in the textbook but in past exam papers its a different story, especially the Rent and Rates A/C

[johnsondunkerson]

the only thing that confusing me is the first example. I understand why we debit and credit assests for it, but couldn't it also be an expense sine they are buying it? the forklift

[aspilobo]

this video is so well but I can't keep up. 😫 The therms chance a lot in English 2 💀💀💀😭😭😭😭

[axfan]

Trying to figure out how to calculate net income with debit/credit t account. This didn't help