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Using T-Accounts

Brian Krogol
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Alright now let's discuss the concept of T. Accounts and the trial balance. Alright so we just went through a whole bunch of transactions in the formation of clutch. Right? But what we saw was a bunch of individual transactions. We saw. Okay this transaction affected cash and accounts receivable. This one we bought some land. This one we paid a dividend, right? But we need to accumulate all those transactions together to get a final balance in an account. So what we're gonna do is we're gonna some all transactions that affected that account to find a final balance. The way we're gonna do that some is we're going to use something called a T. Account. Okay. A. T. Account is where we're gonna take one account such as cash or such as accounts receivable or accounts payable or retained earnings. Any account. And we're going to set it up into this T. Format like you see at the bottom of the screen and on the left hand side of the account we're gonna have debits on the right hand side, we're gonna have the credits to that account. And on the top we're gonna put the title of the account in our example. We're gonna deal with cash. So I'm gonna write cache here. Okay you don't have to put this title of debits and credits onto it once you're familiar with it. I'm doing it right here. Just so you understand that these are the debits and the credits. Okay so throughout the clutch example we had multiple transactions that affected cash, right? We went through different transactions johnny clutch. Put money into the company. We bought land. We got money from our customers. We bought supplies or this and that whatever it was we spent. We we received cash and we paid cash, right? So we want to find the final balance in the cash account. Okay? So if you go back, you're gonna see that in journal entry. A. B. E. F. And G. Back in our clutch tutoring examples. We were affecting cash right? There was going to be either a debit or a credit to cash in those examples. So what we wanna do is we want to bring all of that information into our T. Account for cash. Okay. So let's go ahead and do that right now. I've gone through already and I got the numbers. But I want you to go back, Go shuffle back to the other pages and accumulate all the numbers where you saw cash. Okay. So the first one was in journal entry A We had a debit of 50,000 right? We increased our cash by 50,000 when johnny clutch put the money in the company and then in transaction be right, I'll put in a little a right here. So we know that was transaction a transaction b We purchased land. So we paid out some cash to get land, right? So we're gonna have 40,000 here for be right. And then in transaction E. Um was it E. Yeah. E. I believe is where we paid our um we paid our tutors right? And we paid them $3000 for the month 3000 in transaction E. So that was a credit. Right? And you can just see in the journal entries we already did the hard work. Now we're just going back to the journal entries and say oh that one was a debit. Oh that one was a credit. We're putting it all in one place. All right the next one was in transaction F. We have accounts receivable that were paid to us. Right we received some cash from customers so we would have right here 3500 from F. Right that was a debit. We increased our cash and last but not least in g. We paid $500 to our stockholders in a dividend. Right so we decreased by 500. So the last thing to do is to find our final balance in cash. Right so we do the debits increased cash. The credits decreased cash. Right so all we gotta do is total it up. Right so we're gonna start with 50,000. I'm gonna pull out a. Because it makes this easier. 50,000 plus 3500. Right? Those are our debits. And I'm gonna subtract our credits -40,000 -3,000 -500. And it leaves us with 10,000. Right? And the last thing you do notice how I drew this line here. That means that that is the end of the transactions. Now we want to put the final balance of cash. Cash has a 10,000 balance after we did this right? It was 50,000 plus 3500 minus 43,500 left us with 10,000. Now, is that 10,000? Is that gonna be a debit balance or a credit balance? It's gonna be a debit balance right? Cash cash goes up with debits. And this debit balance of 10,000 signifies that we still have $10,000 in cash after all of these transactions. Right, Johnny Clutch put in 50,000. We did all these things. And we are left with $10,000 in cash. Okay. And it's a debit right? We expect asset accounts to whole a debit balance right? Because they go up with debits. So we would expect there to be some debit balance in cash. If there was a credit balance in cash, that means we have negative cash. That means we have, I don't know, we have less cash than we even have at zero. Right? We're going cash. Um That would be a pretty crazy situation. So We we generally are going to see a debit balance in cash. Okay. So I also wanted to say let's find the final balance in accounts payable. Okay, so we we dealt with cash. We found the final balance in cash. How about the final balance in accounts payable with accounts payable. There was only one transaction and that was transaction. See where we bought supplies. Right? We bought supplies on account and they were $8,000. So over here I'm gonna do accounts payable. And remember a P. Is accounts payable A our accounts receivable. We can use these acronyms and you're gonna see them all the time. So A. P. Is our accounts payable account. And what were the transactions in there? We had a credit of $8000 when we bought those supplies. Right. So this was from a journal entry. C we increased by 8000 and that was it. There was nothing else. There were no other transactions. We didn't pay out any of this to decrease the balance. It sat at 8000. So what you would do you would just draw your line. You would total it up. Which there's nothing to total here. And you'd be left with 8000. Right. And it's a credit balance right? We have 8000. There's more credits than debits. So it stays as a credit. And that makes sense. Right. Accounts payable is a liability account. So we would expect it to have a credit balance. Right liabilities go up with credits. So we would expect there if there's gonna be a liability account that it would have a credit balance. Alright. So let's go ahead and pause here and then we'll move on in the next video