Before the Loan

Note: This set of tables will introduce you to a format that I will use to present the balance of sources and uses. This table shows "T-accounts" from the list of assets and liabilities, shown earlier.

I will explain the T-account format in this and the next couple of pages. I will use this T-account format for several of the examples later in this presentation. If you follow this simple example, you should have no trouble with the more complex examples.

Before the loan, you have 800 bushels of wheat, and your neighbor has none. This chart shows that situation, which I will describe below.

This table shows only the accounts used in this description. Before the loan, all accounts have zero balances except for Your wheat account. The wheat account shows a debit balance of 800 bushels. The debit indicates that you have used the wheat by maintaining it in your possession. The account showing the balancing credit (or source) does not appear in this example, because knowing the original source does not affect this example.

Let's continue this example by looking at these accounts after the loan transaction.