T Account Rules - Financial Accounting

All right, here we go with the fun stuff

We just talked about what a T account was. Now let's talk about the T account rules

Like I said, debits was left, credits was right. But each individual type of T-table or type of account, they're going to mean something different

So that's what we're about to talk about. Bear with me because this is going to get kind of, it can get a little bit tricky

But let's start with the first one. Let's start with assets. Here's an example of our asset account T-table

Again, debit's on the left, credits on the right. But when you're dealing with assets, the debit means plus and the credit means minus

So anytime your asset balance goes up, let's just use cash for an example

Anytime your cash goes up, you're going to put that amount on the debit side because

it's on the plus side. Anytime that you pay out cash or your cash goes down, you're going to put that on the credit

side because the credit is negative. And that's for all asset accounts

That doesn't matter if it's cash accounts receivable, inventory, supply, whatever, they all

follow that same rule. Debit plus, credit minus. Okay. Let's look at the next one. We'll go to

liabilities. Again, debit's still on the left, credit still on the right, but with a liability

account, remember any payables or none revenues, the debit is going to be negative and the credit's

going to be positive. So it's completely reversed from what it was for assets. So again

if I go buy something on account, which means that my payables balance goes up, I'll put that

on the credit side If I pay off a balance let say I have a credit card if I pay off the credit card then I going to put that amount on the debit side because I lowering my balance That liabilities now Let look at equity Equity again debit left credit right This is going to fall in line with liabilities This is going to be minus plus

Minus is a debit credit is a plus. Okay, now we can also break equity down into three pieces. We should know these because of three things that affect retained earnings

We have revenue again debit left credit right revenue is going to be minus plus as well. So again, anytime I earn revenue, it goes on the credit side

Anytime I have to take away revenue, it's going to go on the debit side. Expenses are going to be

plus minus. Debit is plus, credit is minus. Anytime I go and purchase something, or I use

not purchase something, I use something, that amount that I'm going to expense is going to go on the

debit side. Anytime I don't, or I lower my expense, it's going to go on the credit side. And dividend

very similar to expenses. It's just we didn't use them. It's just we, you know, use money

but that's about it. It's going to be the same as expenses. It's going to be plus minus

So the best way I remembered how to do this was the acronym A-D-E, assets, dividends, and expenses

Those are the only three that are plus-minus. Everything else is minus-plus. And so if you need

something, and it's just, it's training yourself. This is, there is logic to it, and you'll

find that out a little bit later, but this is just one of those things. It's just easier just to get to know and get the practice of

So that's your T-table or T-account rules. Appreciate it