T Account Debit Credit

In T-Account Format of Ledger, there is Debit And Credit Side. One Account is debited and other is credited. For Example, On 1^st August, 2018, Mr. A invested Cash Rs. 20000 into the business, then it is a Accounting / Business Transaction. There are two accounts involved in it. One is Cash account and other one is Capital account. According to Rules of Debit and Credit, when Cash increases, we debit it and when it decreases, we credit it. For Capital account, when it increases we credit it and when it decreases i.e. When Owner’s Withdraws Cash From Business For Personal Use, then it decreases.

Following Accounting Journal Entry is passed in the Journal, which is then transferred to T-Accounts of Cash Book and Capital and Drawings Accounts as shown below:

                                                        Cash a/c    20000

                                                                     Capital a/c   20000

(Cash Invested Into Business)

On 5^th August, Mr. A withdrew Rs. 5000 Cash for his personal use, then there are two accounts in this transaction. One is Drawings Account and other is Cash account. Cash is going from the business, so we credit it and drawing is a Contra Equity Account which is deducted from closing capital on Balance Sheet. So, we pass following journal entry as shown below:

                                                Drawings a/c    5000

                                                                    Cash a/c    50000

(Cash Withdrew from Business By Sole Proprietor for His Personal Use)

  Cash Book

For The Accounting Period, August, 2018

Date      Particulars  J/R  L/F   Amount    Date       Particulars     J/R  L/F  Amount

2018                                              Rs.      2018                                                 Rs.

August                                                      August

1^st Aug. Capital a/c    5    3        20000    5^th Aug.  Drawings a/c  7      8      5000

                                                                  31^st Aug. Balance c/d                  15000

                                                  _______                                                    _________

Totals                                          20000                                                         20000

                                                  _______                                                     _________

Capital Account

For The Accounting Period, August, 2018

Date        Particulars   J/R   Amount     Date    Particulars   J/R    Amount

2018                                         Rs.        2018                                     Rs.

August                                                  August

                                                               1^st Aug. Cash a/c      5       10000

31^st Aug.  Balance c/d           10000

                                              _______                                            ________

                                      

 Totals                                     10000                                                  10000

                                              _______                                            ________

                                              _______                                            ________

Drawings Account

For The Accounting Period, August, 2018

Date        Particulars     J/R   Amount        Date         Particulars    J/R    Amount

2018                                          Rs.            2018                                          Rs.

August                                                       August

 

5th Aug. Drawings a/c   7       5000

                                                                    31^st Aug.  Balance c/d             5000

                                            ________                                                       ________

                                        

 Totals                                     5000                                                             5000

                                            ________                                                       ________

                                            ________                                                       ________

Cash, Capital and Drawings T-Accounts are prepared and then final balance or balance carried down is transferred to balance sheet at the end of accounting period.

The Journal entries from journal are transferred to respective ledgers of accounts is called postings which has 5 Steps In Posting.

1. Enter the date

2. Writing Particulars or Descriptions

3 Entering Journal Reference or J/R

4. Recording Debited and Crediting Amounts on Debit Side (Left Side) or Credit Side (Right Side)

5. Finding Out Carried Down Balance or Closing Balance at the end of accounting period.

There are two types of Ledgers

(i) Standard Format (T-Account Format)

The most important format is Standard form which is also known as T-Account as it shaped as T Letter form.

(ii) Self-Balancing Format

Self-Balancing form is the most modern form and this format is used most of the advanced businesses.

Self-Balancing Format

Date      Particulars            J/R                    Debit           Credit                   Balanced

2018                                                               Rs.               Rs.

July

So, a T-Account for any Type of Account is prepared to find the totals of debits and credits and then carried down balance is either transferred to Income Statement / Profit And Loss Account as in case of Expenses and Revenues or Balance Sheet as in case of Assets, Liabilities and Owner’s Equity or Equity (in case of Company or Corporation) at the end of accounting period.