Final answer:
To record a cash deposit transaction for Singleton Bank which has $10 million in deposits, a journal entry would involve debiting the cash account and crediting the deposits account, which affects the T-account by increasing both assets and liabilities by the deposit amount, maintaining the balance between total assets and total liabilities plus net worth.
Step-by-step explanation:
Understanding T-Accounts and Journal Entries
When a student is learning about recording transactions using journal entries and T-accounts, it is important to understand the basics of accounting. For our hypothetical Singleton Bank with $10 million in deposits, its initial T-account would show the deposits on the liabilities side, because the bank owes this money back to the depositors. The bank's assets might include cash in its vaults and any loans it has made.
To make a journal entry for a deposit transaction, we'd debit the cash account (increase assets) and credit the deposits account (increase liabilities). For example, if Singleton Bank received a $1 million cash deposit, the journal entry would look like this:
- Debit Cash $1 million (assets increase)
- Credit Deposits $1 million (liabilities increase)
In T-account terms, $1 million would be added to the left side (assets) under Cash and to the right side (liabilities) under Deposits to reflect this transaction. It is essential to remember that in accounting, the sum of all assets must always equal the sum of all liabilities plus the net worth of the firm.