VII

• A T-account is a visual representation of individual accounts so that all additions and subtractions (debits and credits) to the account can be easily tracked and represented visually.
• The left side of a T-account is always the debit side and the right side is always the credit side no matter what the account is, by convention.
• For asset accounts, the left side is used for recording increases and the right side is used for recording decreases.
• For liability and equity (or capital) accounts, the procedure is the reverse, the right side is used to record increases and the left side to record decreases.
• The debit and credit rule’s application to income and expense accounts is based on the relationship of these accounts to equity.
• Net income or net loss for the period is the net increase or decrease in equity resulting from the operations.
• Income increases equity, hence increases in income are recorded as credits.
• Expenses decrease equity and are therefore recorded as debits.
• If someone deposits cash in a bank, the bank’s cash reserves will increase, hence it is debited.
• An increase in cash leads to an increase in assets, hence it is debited.
• An increase in the accountholder’s deposits will increase the liabilities of banks, hence it is credited.
• If cash will be deposited to the accountholder’s savings account, the transaction should be recorded under bank’s on-line account.
• If a check issued by another person/company is to be deposited under the accountholder’s checking account, the transaction should be recorded under bank’s demand deposit account.
• The person/company who issued the check now owes the bank X amount, hence the asset of the bank will increase by X amount since it will now try to collect the funds that it is owed, specifically, this transaction should be debited under bank’s branch clearing account.
• If withdraw in cash from savings account, the bank’s cash reserves will decrease which in turn decreases its assets, hence it is credited.
• The accountholder’s savings account will decrease, in turn, the savings deposit liabilities of the bank will also decrease, hence the amount to be withdrawn is debited under bank’s on-line account.
• If withdraw in cash from accountholder’s checking account, the bank’s cash reserves will decrease which in turn decreases its assets, hence it is credited.
• If a check is encashed by the bank and the amount is deposited in the accountholder's savings account, the accountholder's savings account will increase and the savings deposit liabilities of the bank will also increase, hence the amount to be deposited is credited under the bank's on-line account.
• If a check is encashed by the bank and the amount is withdrawn from the accountholder's checking account, the bank's cash reserves will decrease, thereby decreasing its assets, hence the amount is credited.
• If a check is encashed by the bank and the amount is deposited in the accountholder's savings account, the accountholder
• If a check is encashed by the bank, the bank's cash reserves will decrease, thereby decreasing its assets, hence the amount is credited.
• When a check is deposited, the accountholder's checking (or demand deposit) account will decrease and the bank's demand deposit liabilities will also decrease, hence the amount to be withdrawn is debited under the bank's demand deposit account.
• The person/company who issued the check now owes the bank the amount of the check, hence the asset of the bank will increase by the amount since it will now try to collect the funds that it is owed, specifically this transaction should be debited under the bank's branch clearing account.
• If a check is encashed by the bank and the amount is withdrawn from the accountholder's personal checking account and deposited in the accountholder's savings account, the accountholder's checking (or demand deposit) account will decrease and the savings deposit liabilities of the bank will also decrease, hence the amount to be withdrawn is debited under the bank's demand deposit account.