Now that you can create journal entries, let's learn how businesses organize and track account balances efficiently.

Imagine trying to find your current cash balance by reading through hundreds of journal entries. There has to be a better way!

Engagement Message

How do you think businesses keep track of running account balances?

Meet the T-account - a simple but powerful tool that looks exactly like the letter "T".

The account name goes on top, debits go on the left side, credits go on the right side. It's like a visual summary of everything that happened to one specific account.

Engagement Message

Why would organizing debits and credits visually be helpful?

Let's see a T-account in action using our previous cash transactions.

Cash

Current balance: $2,500 (left side minus right side)

Engagement Message

What feature of the T-account helps you see the balance at a glance?

Here's the key insight: every journal entry flows into T-accounts. This process is called "posting."

When you post a journal entry, you take each debit and credit amount and record it in the appropriate side of the relevant T-accounts.

Engagement Message

Why would this posting step be essential for account management?

The general ledger is simply a collection of all T-accounts for a business, organized by account number.

Think of it as a filing system where each account has its own page showing all activity and the current balance.

Engagement Message

How does this compare to keeping a running balance in your personal checkbook?

This system creates a perfect flow: transactions → journal entries → T-accounts → account balances.

Each step serves a purpose: journal entries provide the complete story, T-accounts provide the running totals, and the general ledger organizes everything systematically.

Engagement Message

Which step do you think would be most useful for day-to-day business decisions?

Here's why T-accounts are so valuable: they make it easy to see patterns and spot errors.

If an account balance looks wrong, you can scan the T-account to see all the debits and credits that created that balance.

Engagement Message

If Cash is debited $200, to which side of the Cash T-account does it go?

Type

Sort Into Boxes

Practice Question

Based on normal account behavior, sort these items into the correct sides of a Cash T-account:

Labels

• First Box Label: Left (Debit) Side
• Second Box Label: Right (Credit) Side

First Box Items

• Cash received
• Initial investment
• Customer payment

Second Box Items

• Rent paid
• Supplies bought
• Equipment purchase