The use of 'T Charts' is a useful way of checking that entries are made so that the system balances. With double entry bookkeeping it is essential that a transaction is made as both a receiving (debit) and a giving (credit) entry and where there are several ledgers and accounts involved in a transaction the use of these charts is useful since the postings will be seen to balance if made correctly

In the example shown here a credit sale has been made and the four charts would be the Sales Ledger, the CIF (Carriage, Insurance and Freight) Cost Account, the Customer's Nominal Account and the Cash Account. When the invoice is created the goods value (X) is posted to the Sales Ledger as a Give or credit entry since it is from Sales that the Customer receives the goods. So there will be a corresponding Receive or debit entry made in the Customer's Nominal Account. The same will be made for the CIF charges (#). When the Customer makes a payment they Give (O) , ideally for the total amount owing, but where there are several transactions on different dates the money received will be only part of that owing and so a balance will be left in the Customer's Nominal Account

Sales Receive Db Give Cr X

CIF Receive Db Give Cr #   Nominal - Customer Receive Db Give Cr X   # O   Cash Receive Db Give Cr O

In automated accounting systems these entries are made in the correct manner provided the correct ledger entry is made in the first place. However, even in automated systems there is sometimes the need to think the whole process though before you make that one single entry. If you get it wrong it will mean reversing all the entries made and then repeating the entry in the correct manner. This can ba a pain when the system will not let you make a simple reversal !!

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Last Update 28-Feb-2010

Date first published 07-Nov-2005