One of the most primary essence of accounting is the understanding of creating a T account. The Trial Balance Accounting, as it is called, functions as basics towards complex accounting and to keep tabs on the expenses and earnings of the business. A trial balance is maintained at specifics dates for a single asset or liability to the business, as a result all the incoming and outgoing cash is monitored and used for further reference. The article that follows, discusses the importance and results that are and can be achieved through such a basic method of accountancy.
A T account is so called due to its flow shape, where the inflowing cash, debit, is done on the right side while the out flowing cash, credit, is done on the left. Maintained for annual or a half year, according to the requirement, the account manages to exhibit all the use of finances done on it throughout the period. A debit entry in one account is matched by the credit entry in the other to have a clear picture of the flow of cash.
THE PURPOSE OF THIS ACCOUNT:
The reason that this part of the accounting is hailed with such esteem and is due to the efficiency that it provides to a business. Such an account is used to extract the exact balance from the ledgers to carry out further calculations and for future references. The prime purpose of these calculations is to have an understanding of the flow of cash within the business, which this system provides in an understandable manner.
THE EXPECTED RESULTS FROM IT:
The final or the closing balances on these accounts are driven towards the financial statements and the calculation of the profit or loss that is rendered in the preceding year. An annual profit and loss statement is created through these balances and any error or miscalculation in the ledgers can be checked from these accounts and corrected instantly.
