Final answer:
A chart of accounts organizes all the accounts in a company's general ledger, and is used in accounting to keep track of financial transactions. A T-account is a tool that represents this chart with a two-column format, showing assets on one side and liabilities and equity on the other, helping maintain balance in double-entry bookkeeping.
Step-by-step explanation:
A chart of accounts for a business firm is an organized list of all accounts in the general ledger of a company. It categorizes each account into one of five areas: assets, liabilities, equity, revenue, and expenses. This chart is used in conjunction with accounting software to organize data and keep track of financial transactions.
The T-account is a visual representation of the individual accounts in the chart of accounts. It has a two-column format, resembling the letter "T," which facilitates the process of double-entry bookkeeping. On a T-account, the left side represents debits, while the right side represents credits. In the context of a balance sheet, the T-account helps display assets on the left column and liabilities, along with equity (net worth), on the right column. Figure 3 from the reference material illustrates a simplified balance sheet in this format.
Particularly for banks, assets might include reserves or financial instruments such as loans made by the bank and U.S. Government Securities. Liabilities for a bank include customer deposits and other debts. The difference between total assets and total liabilities represents the net worth of the company, included on the liabilities side in order to balance the T-account to zero.