Chapter 2: T Accounts

Double-entry accounting is a system that recognizes the different sides of business transactions as debits and credits: 

• • Debit - entry on the left side of an account 

  • Credit - entry on the right side of an account

A T Account, like the one above, is an efficient tool for analyzing double-entry accounting transaction. T Accounts break transactions up into debit and credits and apply a specific dollar amount to the account. 

Under double-entry accounting rules, every business transaction must have an equal amount of debits and credits. The rules for debits and credits vary according to whether an account is classified as an asset, a liability, or the owner's capital account. Each account classification has a specific side that is its normal balance side. An account's normal balance is always on the side used to record increases to the account.