Regarding T-accounts, which of the following statements is correct?
A. A T-account is a more detailed form of an account in the journal.
B. The right side of a T-account is a debit for asset accounts and a credit for equity accounts
C. Debits are posted on the right side of the vertical line.
D. A T-account is a summary device with credits posted on the right side of the vertical line.
The correct answer and explanation is :
The correct answer is:
D. A T-account is a summary device with credits posted on the right side of the vertical line.
Explanation:
A T-account is a fundamental tool used in accounting to visualize the effects of transactions on different accounts. It is called a T-account because its structure resembles the letter “T,” with a vertical line separating the left and right sides and a horizontal line representing the account title.
- Debits and Credits in a T-Account:
- The left side of a T-account is always for debits (DR).
- The right side of a T-account is always for credits (CR).
- This rule applies universally, regardless of the type of account.
- Clarification of the Answer Choices:
- Option A (Incorrect): A T-account is not a more detailed form of a journal account. Instead, it is used to summarize transactions from the journal and help track the balances of accounts. The journal records transactions in chronological order, while the T-account visually separates debits and credits.
- Option B (Incorrect): While the right side of a T-account is a credit for equity accounts, it is not a debit for asset accounts. Asset accounts follow the rule: debit increases, credit decreases.
- Option C (Incorrect): Debits are always posted on the left side of the T-account, not the right.
- Option D (Correct): A T-account serves as a summary device, and per accounting conventions, credits are always posted on the right side of the T-account.
T-accounts help accountants analyze transactions and prepare financial statements accurately.