4 main accounts

Each transaction is always recorded in two out of 4 accounts. The four accounts are Assets, Liabilities, Income, and Expense. “Why there need to be two entries?” you may think. A simple way to understand it is to imagine that money move from one account to another any time a transaction takes place. One account gets debited (the account TO) and the other credited (the account FROM). Do not get mislead by the words debit and credit, in accounting their meaning can differ from what you imagine it means. Credit is not always negative, and debit is not always positive.

The T-account got its name from the shape which looks like a big letter T with credit and debit on both sides of the accounts. The transactions are entered into two accounts so that all of the financial statements always balance. In the end, achieving balance is great, isn’t it?  

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