Nominal Account Section

Nominal accounts are those reported in the income statement which is the summary of the revenue and expenses of a business for a period of time.

Nominal account section. In accounting nominal accounts are the general ledger accounts that are closed at the end of each accounting year. The nominal accounts are almost always the income statement accounts such as the accounts for recording revenues expenses gains and losses. As a result the nominal accounts are also referred to as temporary accounts.

Revenue or expense account that is a subdivision of the owners equity account and which is closed to a zero balance at the end of each accounting period. The nominal account is an income statement account expenses income loss profit. So nominal accounting starts with a zero balance at the start of every accounting year.

Definition of real account. At the end of the fiscal year the balances in these accounts are transferred into permanent accounts. Balances in nominal accounts are cumulative over a period of time.

When the income statement accounts are closed at the end of the accounting year the net amount will ultimately end up in a balance sheet equity account such as the proprietor s capital account or the corporation s retained earnings account. It starts with a zero balance at the beginning of a new accounting period accumulates balances during the period and returns to zero at the year end by means of closing entries. Take the balance in the sales revenue account at the end of the year for example.

Nominal account section sales n1 998 200 cost of sales n2 552 700 debtors allowance n3 3 200 rent income n4 15 600 interest on fixed deposit n5 1 600 interest on notice deposit n6 554 interest on savings account n7 119 interest on current account n8 63 interest received n9 478. Accounting is both science and art. The closing process transfers their end of year balances from the nominal accounts to a permanent or real general ledger account.

It is also known as a temporary account unlike the balance sheet account asset liability owner s equity which are permanent accounts. The balance in a real account is not closed at the end of the accounting year. A nominal account is an account that is used during an accounting period to summarize the cash coming into the company and being paid out of the company for that time period.