Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › T-Accounts… Urgh!
- This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.
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- February 3, 2018 at 11:47 am #434884
Hi,
I am currently working through Prepayments and Accruals and I although I now understand what these are, I really can’t get my head around… T-Accounts. This question is really to do with the nature of t-accounts rather than anything else.
For example, I am working through Chapter 4 – Example 2, Accruals, and we add the three quarterly paid cash amounts to the debits on the Telephone account, then at the end we sum these.
Now the bit I don’t understand:-
We then ‘balance’ the T-account by adding the BALance to the credit column for the same value, and then we add a corresponding BALance back to the debit side, this is where I become lost.
1. Why are we even doing this?
2. This leads to a very ‘messy’ t-account with a huge list of payments, for example, in my t-account we have made three payments (500, 600, 750) totalling 1850.My t-account now has 500, 600, 750, then the SUM(1850), then BAL 1850 underneath.
If I was really a bookkeeper or looking at these accounts as I would assume the payments were now in fact 3700 for the year. (Not that I know anything about managing accounts until now, of course).
I guess my question is why we do the BAL (balance) thing, or is this just representing what would happen at the end of the year?
I have ignored this problem for a few chapters but just want to clarify what is happening in my own head before I carry on as I really am just following the lectures but not really understanding why we keep balancing the same t-account throughout the lecture and if I should be crossing off something above or similar.
February 4, 2018 at 4:52 am #434966You really need to watch the earlier lectures in detail.
We do the balancing in order to both decide what the true expense is for the year, and also to show how much is owing or owed at the end of the year.
Again, you really need to watch the earlier lectures because it is in them that I explain hoe we balance and why.
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