The "T-Account"

One way to illustrate how accounts increase or decrease is to compare an account to the letter "T". Increases are recorded on one side and decreases on the other side. Since cash is an asset, and assets are on the left-hand side of the balance sheet, you record increases in cash on the left-hand side of the T-account. You record decreases on the right-hand side.

The amount in the Cash account after the transactions have been entered is its balance. The balance is the difference between the increases and decreases, in this case €4,000 (€10,000 - €6,000). In the accounts, the currency symbol (€) is not shown. All the amounts are euros but, it could be any currency.