Discussion Forum Unit 3

Differences between Permanent "real" accounts and Temporary ¨nominal¨ accounts:

At the conclusion of the accounting year, the balance in a nominal account is closed. As a result,
a nominal account has no balance at the start of each accounting year. A nominal account is
sometimes known as a transitory account because the balance does not transfer over to the
following accounting year (Averkamp, n.d.).
A real account's balance is not closed at the conclusion of the fiscal year. A genuine account
therefore starts each accounting year with its balance from the preceding year's conclusion. A
real account is also referred to as a permanent account because the year-end balance is carried
over to the following accounting year (Averkamp, n.d.).
What type of information is contained in nominal accounts, and what type of information is
contained in real accounts?

Accounting transaction data for revenue, expense, gain, and loss transactions all of which show
up in the income statement is gathered using nominal accounts. Therefore, examples of
transactions that are documented in nominal accounts include income from the sale of services,
the cost of items sold, and a loss on the sale of an asset (Bragg, 2022).
A genuine account is one that, at the end of the year, retains and rolls forward its ending balance.
These sums then serve as the initial balances for the subsequent period. Real accounts are
contained in the balance sheet's assets, liabilities, and equity categories. Contra asset, contra
liability, and contra equity accounts are also considered real accounts because they maintain their
balances after the current fiscal year (Bragg, 2022).

Which financial statement contains the information from nominal accounts and which
contains the information from real accounts?
The accounts for documenting revenues, expenses, gains, and losses on the income statement are
examples of nominal accounts. The balance sheet accounts, such as those for recording assets,
liabilities, and owner's (or stockholders') equity, are the actual accounts. (Averkamp, n.d.)

Provide an example of real accounts and an example of nominal accounts.

The balance sheet accounts, such as those for recording assets, liabilities, and owner's (or
stockholders') equity, are the actual accounts. However, because it is closed straight to the
owner's capital account at the end of the year, the sole proprietor's drawing account, which is
shown on the balance sheet throughout the year, is only open temporarily. (Averkamp, n.d.).
The accounts for documenting revenues, expenses, gains, and losses on the income statement are
examples of nominal accounts. The net amount will ultimately be placed in a balance sheet
equity account, such as the proprietor's capital account or the corporation's retained earnings
account, when the income statement accounts are closed at the end of the accounting year
(Averkamp, n.d.).
References
Averkamp, H. (n.d.). What is the difference between a nominal account and a real account?
Accounting coach. Accounting Coach.com. Retrieved from
https://www.accountingcoach.com/blog/what-is-the-difference-between-a-nominal-account-and-
a-real-account
Bragg, S. (2022, May 24). Real account definition. Accounting Tools. Retrieved from
https://www.accountingtools.com/articles/what-is-a-real-account.
Franklin, M., Graybeal, P., & Cooper, D. (2020). Principles of Accounting Volume 1 Financial
Accounting. OpenStax, Rice University.
https://openstax.org/details/books/principles-financial- accounting