Question

I am unsure of how to transfer my journal entries to T accounts. Please help.

Answer 1

Answer:

First, we should understand what is journal entries and T accounts...

Journal Entries:

An accounting journal entry is a method used to enter an accounting transaction into the accounting records of a business. The accounting records are aggregated into the general ledger, or the journal entries may be recorded in a variety of sub-ledgers, which are later rolled up into the general ledger. This information is then used to construct financial statements as of the end of a reporting period.

There must be a minimum of two line items in a journal entry, though there is no upper limit to the number of line items that can be included. A two-line journal entry is known as a simple journal entry, while one containing more line items is called a compound journal entry. A company may use a great many journal entries in just a single reporting period, so it is better to use a larger number of simple journal entries than a smaller number of compound journal entries, in order to clarify why the entries are being made. This is useful when journal entries are being researched at a later date, and especially when they are being reviewed by auditors.

T-Account:

A T-account is a tool that is used to help understand individual ledger accounts and the effects of each transaction. Basically, a T-account is a way to organize and summarize transactions in an individual ledger.

T-accounts get their name from their shape. A T-account look like the letter “t.” Each T-account has a heading at the top identifying what account it belongs to. The body of a T-account is split into two columns. The left side is the debit column and the right side is the credit column. Each T-account is totaled at the bottom. Transactions are posted to each T-account just like writing a journal entry.

How to transfer journal entries to T-Account:

Once journal entries are made in the general journal or subsidiary journals, they must be posted and transferred to the T-accounts or ledger accounts. This is the second step in the accounting cycle.

The purpose of journalizing is to record the change in the accounting equation caused by a business event. Ledger accounts categorize these changes or debits and credits into specific accounts, so management can have useful information for budgeting and performance purposes.

Since management uses these ledger accounts, journal entries are posted to the ledger accounts regularly. Most companies have computerized accounting systems that update ledger accounts as soon as the journal entries are input into the accounting software. Manual accounting systems are usually posted weekly or monthly. Just like journalizing, posting entries is done throughout each accounting period.

As a small business owner, you should be posting to the general ledger as you make transactions. At the end of each month, transfer journal entries into a ledger. The ledger organizes the same information in a different format.

Instead of a comprehensive list, ledger entries are separated into different accounts. The accounts, called T-accounts, look like an uppercase “T” and trace debits and credits in your accounting records.