What is “T” Shape Accounts?
If you want a career in accounting, T Accounts may be your new best
friend. The T Account is a visual representation of individual accounts in
the form of a “T,” making it so that all additions and subtractions (debits
and credits) to the account can be easily tracked and represented
visually.
Each account will have its own individual T Account, which looks like the
following:
Debits and Credits for T Accounts
When most people hear the term debits and credits, they think of debit
cards and credit cards. In accounting, however, debits and credits refer
to completely different things.
Debits and Credits are simply accounting terminologies that can be
traced back hundreds of years, which are still used in today’s double-
entry accounting system. A double-entry accounting system means that
every transaction that a company makes is recorded in at least two
accounts, where one account gets a “debit” entry while another account
gets a “credit” entry.
These entries are recorded as journal entries in the company’s books.
Debits and credits can mean either increasing or decreasing for
different accounts, but their T Account representations look the same
in terms of left and right positioning in relation to the “T”.
T Accounts Explained
The left side of the Account is always the debit side and the right side is
always the credit side, no matter what the account is.
For different accounts, debits and credits can mean either an increase
or a decrease, but in a T Account, the debit is always on the left side
and credit on the right side, by convention.
Let’s take a more in-depth look at the T accounts for different accounts,
namely, assets, liabilities, and shareholder’s equity, the major
components of the balance sheet or statement of financial position.
For asset accounts, which include cash, accounts
receivable, inventory, PP&E, and others, the left side of the T Account
(debit side) is always an increase to the account. The right side (credit
side) is conversely, a decrease to the asset account. For liabilities and
equity accounts, however, debits always signify a decrease to the
account, while credits always signify an increase to the account.
T Accounts for the Income Statement
T Accounts are also used for income statement accounts as well, which
include revenues, expenses, gains, and losses.
Once again, debits to revenue/gain decrease the account while credits
increase the account. The opposite is true for expenses and losses.
Putting all the accounts together, we can examine the following.
Using T Accounts, tracking multiple journal entries within a certain
period of time becomes much easier. Every journal entry is posted to its
respective T Account, on the correct side, by the correct amount.
For example, if a company issued equity shares for $500,000, the
journal entry would be composed of a Debit to Cash and a Credit
to Common Shares.
Question
Open a 'T' shape account for machinery and put the following transactions on the
proper side:
₹
(i) Machinery purchased 40,000
(ii) Machinery sold 10,000
(iii) Machinery purchased 8,000
(iv) Machinery discarded 14,000
(v) Depreciation on machinery 1,000
Solution
Machinery(Asset) Account
Dr. Cr.
Amount Amount
Date Particulars Particulars
(Rs) (Rs)
Bank (Purchased) 40,000 Bank (Sale) 10,000
Bank (Purchased) 8,000 Bank (Discarded) 14,000
Depreciation 1,000
Balance c/d 23,000
48,000 48,000
SIMILAR QUESTIONS
Q. Open 'T' shape account for Machinery and write the following on the proper side:
(₹)
1. Machinery purchased for 5,00,000
2. Machinery sold 1,20,000
3. Machinery discarded 50,000
4. New Machinery purchased 2,00,000
5. Machinery destroyed 40,000
Q. From the following transactions of a concern, prepare Machinery Account for the year ending 31st
March, 2013 :-
2012
April 1 : Purchased a second-hand machinery for ₹ 40,000.
April 1 : Spent ₹ 10,000 on repairs for making it serviceable.
Sept. 30 : Purchased additional new machinery for ₹ 20,000.
Dec. 31 : Repairs and renewals of machinery ₹ 2,000.
2013
March 31 : Depreciate the machinery at 10% p.a.
Q. From the following transactions of a concern, prepare the Machinery Account for the year ended 31st
March, 2019:
1st April, 2018 : Purchased a second-hand machinery for ₹ 40,000
1st April, 2018 : Spent ₹ 10,000 on repairs for making it serviceable.
30th September,
: Purchased additional new machinery for ₹ 20,000.
2018
31st December, 2018 : Repairs and renewal of machinery ₹ 3,000.
31st March, 2019 : Depreciate the machinery at 10% p.a.
Q. On 1st June, 2010, Kedarnath Ltd. purchased a machinery for ₹ 27,00,000. Depreciation is provided @
10% p.a. on diminishing balance method and the books are closed on 31st March each year. On 1st
October, 2012, a part of the machinery purchased on 1st June, 2010 for ₹ 6,00,000 was sold for ₹ 3,50,000
and on the same date another machinery was purchased for ₹ 8,00,000. You are required to show (i)
Machinery A/c, (ii) Provision for Dep. A/c, and (iii) Machinery Disposal A/c.
Q. Prepare an Accounting Equation on the basis of the following transactions:
(i) Started business with cash ₹ 70,000.
(ii) Credit purchase of goods ₹ 18,000.
(iii) Payment made to creditors in full settlement ₹ 17,500.
(iv) Purchase of machinery for cash ₹ 20,000.
(v) Depreciation on machinery ₹ 2,000.
Q. On 1st July, 2010, X Ltd. purchased a machinery for ₹ 15,00,000. Depreciation is provided @ 20% p.a. on
the original cost of the machinery and books are closed on 31st March each year. On 31st May, 2012, a part
of this machine purchased on 1st July 2010 for ₹ 3,60,000 was sold for ₹ 2,40,000 and on the same date
new machinery was purchased for ₹ 4,20,000. You are required to prepare (a) Machinery Account, (b)
Provision for Depreciation Account, and (c) Machinery Disposal Account.
Q. From the following transactions of a concern, prepare the Machinery Account for the year ended 31st
March, 2018:
1st April, 2017 : Purchased a second-hand machinery for ₹ 40,000
1st April, 2017 : Spent ₹ 10,000 on repairs for making it serviceable.
30th September,
: Purchased additional new machinery for ₹ 20,000.
2017
31st December, 2017 : Repairs and renewals of machinery ₹ 3,000.
31st March, 2018 : Depreciate the machinery at 10% p.a.
Q. A company purchased a machinery for ₹ 50,000 on 1st October, 2015. Another machinery costing
₹10,000 was purchased on 1st December, 2016. On 31st March, 2018, the machinery purchased in 2015
was sold at a loss of ₹ 5,000. The company charges depreciation @ 15% p.a. on Diminishing Balance
Method. Accounts are closed on 31st March every year. Prepare the Machinery Account for 3 years.
Q. A company purchased a machinery for ₹ 50,000 on 1st October, 2016. Another machinery costing ₹
10,000 was purchased on 1st December, 2017. On 31st March, 2019, the machinery purchased in 2016
was sold at a loss of ₹ 5,000. The company charges depreciation @ 15% p.a. on Diminishing Balance
Method. Accounts are closed on 31st March every year. Prepare the Machinery Account for 3 years.
Q. Sharma & Co. whose books are closed on 31st March, purchased a machinery for ₹ 1,50,000 on 1st
April, 2015, Additional machinery was acquired for ₹ 50,000 on 1st October, 2015. Certain machinery
which was purchased for ₹ 50,000 on 1st October, 2015 was sold for ₹ 40,000 on 30th September, 2017.
Prepare the Machinery Account and Accumulated Depreciation Account for all the years up to the year
ended 31st March, 2018. Depreciation is charged @ 10% p.a. on Straight Line Method. Also, show the
Machinery Disposal Account.
