From the course: Accounting Foundations: Bookkeeping

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Computing account balances

Computing account balances

From the course: Accounting Foundations: Bookkeeping

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Computing account balances

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- Now that we understand the journal entries, the next step is that those journal entries need to be posted to their related accounts. T accounts are used to illustrate this process with the letters A through G showing the cross-references to the journal entries. A balance is showed for the end of the period. Turns out, where only one transaction is involved, the amount of the transaction is also the account balance. Let's take a detailed look at the cash T account. What can we surmise just by looking at this account? First, what do we know? Well, for the cash account, it being an asset, we know that debits mean increase and credits mean decrease. We can tell by looking at this account that three transactions, transactions A, C, and G, cause cash to increase. And we know that three transactions, transactions B, D, and F, cause cash to decrease. We also know that the ending balance in the cash account is $7,900. We could do a similar analysis for each account. By knowing if the account…

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