Which of the following is an example of a T-account?
A. An account that includes only liabilities
B. An account that includes only assets
C. An account that includes only owner equity
D. An account that includes only cash transactions
Answer: D. An account that includes only cash transactions
T-account for cash transactions is a specialized form of general T-account, which is exclusively popular in book keeping activities. It has been created to allow a simple monitoring of all incoming and outgoing money, which holds great significance and often takes the form of the major budget for any business or organization.
Accompanied by the credit side (right) of the cash T accounts, debit entries are made to record cash receipts or inflows, which may include cash sale proceeds, money collections from clients, or investments obtained. On the credit side of the [Balance Sheet] (the right side), entries are made to record Cash disbursements; that is, Cash flow out of the business whether for payment of suppliers, labor wage, rent, or any other cash expenditure.
The cash T-account provides a real and illustrative time cushion that of net cash positions that goes for the management of cash liquidity, the presentation of cash flow statement, and the full being informed for financial decisions.