T-accounts: posting journal entries and finding balances

The T-account is the simplest picture of a ledger account, and it is the picture almost every bookkeeper still draws on scrap paper when something does not add up. Draw a large T. Write the account name across the top. Debits go on the left side, credits on the right. That is it. Once a month's journal entries are posted into T-accounts, you can total each side, find each account's balance, and you have everything you need for a trial balance.

This page explains posting, the step that moves amounts from the journal into the ledger, and walks through a short month from our practice set: four entries, four accounts, every total and balance.

Journal first, ledger second

Transactions are first recorded in the journal, in date order, as entries with at least one debit and one credit. The journal tells the story of each transaction in one place, but it does not tell you how much cash you have, because cash is scattered across dozens of entries. Posting copies each line of each entry into the ledger account it names, on the same side. After posting, each ledger account gathers every change to that account, and its balance can be found.

The rules for posting are mechanical:

1. For each line of the entry, find the account's T-account (start a new one if it is the first time the account is used).
2. Put a debit on the left side, a credit on the right side. Never change the side.
3. Note the entry number (or date) beside the amount, so you can trace it back. This is the posting reference.

Posting never decides anything. All the thinking about which account to debit or credit happened when the journal entry was written. If an amount looks wrong in the ledger, the fix belongs in the journal.

Totals and balances

When everything is posted, work out three numbers for each account:

• Total debits: the sum of the left side.
• Total credits: the sum of the right side.
• Balance: the larger total minus the smaller, on the side of the larger.

Accounts normally end on their normal side: assets, expenses and drawing with debit balances; liabilities, owner's capital and revenues with credit balances. A balance on the other side is unusual and worth checking.

Worked example: a short month

Bluebird Veterinary recorded these August journal entries (generated for one of our exercises):

1. Debit Cash $20,000.00; credit Owner's Capital $20,000.00.
2. Debit Cash $2,935.00; credit Service Revenue $2,935.00.
3. Debit Cash $135.00; credit Accounts Receivable $135.00.
4. Debit Accounts Receivable $5,620.00; credit Service Revenue $5,620.00.

Step 1: post every line

Notice entry 3: a collection from a customer is a debit to Cash and a credit to Accounts Receivable, so it is posted to two different T-accounts on opposite sides. Every entry touches at least two accounts, and every account can be touched by many entries.

Step 2: total each side and find the balance

Step 3: check

Two checks catch almost every posting slip:

• Total of all debits = total of all credits. Across the four accounts, debits are $23,070.00 + $5,620.00 = $28,690.00 and credits are $135.00 + $20,000.00 + $8,555.00 = $28,690.00. Each entry balanced, so the postings must too.
• Debit balances = credit balances. $23,070.00 + $5,485.00 = $28,555.00, and $20,000.00 + $8,555.00 = $28,555.00. This is your trial balance, in miniature. The trial balance lesson takes it from here.

A compound entry

Longer exercises include entries with three or more lines, and the posting rule does not change. Suppose an entry reads: debit Equipment $4,000.00; credit Cash $1,500.00; credit Notes Payable $2,500.00. It is posted to three T-accounts: $4,000.00 on the left of Equipment, $1,500.00 on the right of Cash, and $2,500.00 on the right of Notes Payable, each marked with the same entry number. The entry's debits and credits each total $4,000.00, so the ledger stays in balance. The mistake to avoid is netting or combining before posting: post the three lines exactly as written, and let the T-accounts do the adding.

Reading a T-account backwards

Posting references make the ledger searchable in both directions. From an entry, you can find every account it touched. From a puzzling amount in a T-account, the entry number takes you back to the journal, where the description explains what happened. When a balance looks wrong, list the amounts on each side with their references and ask, for each one, whether it belongs there. In practice the culprit is usually a posting to the wrong account (a supplies purchase posted to Supplies Expense), a posting to the wrong side, or a transposed amount. The correcting errors lesson covers how to fix each of these.

From T-accounts to statements

The balances you work out here feed every later step of the accounting cycle. They form the unadjusted trial balance. After adjusting entries are posted to the same T-accounts, they form the adjusted trial balance, from which the income statement and balance sheet are prepared. Closing entries are posted to T-accounts too, leaving only the permanent accounts with balances. Each of those steps is just more posting, using exactly the rules on this page.

Why learn T-accounts if software posts for you?

Accounting software posts every entry the moment it is saved, so nobody copies amounts by hand any more. T-accounts are still worth knowing, for three reasons. They are the fastest way to think through a complicated transaction before entering it: sketch the accounts, put the amounts on their sides, and see what the balances will be. They make errors visible: when a balance looks wrong, drawing the T-account and listing what was posted usually reveals the culprit in minutes. And they are the language of interviews and tests for bookkeeping roles, where you may be asked to post a few entries and produce balances without a computer.

A posting checklist

• Have you posted every line of every entry, including the opening investment?
• Is each amount on the same side as in the entry?
• Have you written the entry number beside each amount?
• Did you total each side separately before finding the balance?
• Is each balance on the account's normal side, entered as a positive number?
• Do total debits equal total credits across all the accounts?

Accounts with no activity on one side

Many accounts in a short month only have postings on one side: Owner's Capital receives the opening investment as a credit and nothing else; a revenue account collects credits only. Their total on the other side is simply zero, and the balance equals the one-sided total. Write the zero rather than leaving the side blank; it shows you looked, and it is what the exercises expect.

Common mistakes

1. Posting to the wrong side. A debit in the entry is a debit in the ledger, always on the left.
2. Treating every balance as debits minus credits. For credit-balance accounts, the balance is credits minus debits, and it is reported as a positive credit balance.
3. Missing a line of a compound entry. Entries with three or more lines need every line posted.
4. Netting within an entry. Post each line as it appears; do the netting when you work out the balance.
5. Adding a total from the wrong account. Keep a separate T for every account, even when two accounts have similar names.

How the practice works

Each exercise generates a month of journal entries, starting with the owner's investment. Post them on paper or in your head, then enter, for each account, its total debits, total credits (type 0 if a side has no postings) and its balance as a positive amount. Press Check: each number is compared with totals computed from the same entries, and the two common mistakes above are recognised with their own feedback. The lesson grows from a short month to a full month with compound entries.