Nominal Account
In accounting, a nominal account is a general ledger account that is use to record revenues, expenses, gains, and losses for a specific accounting period. These accounts are also known as income statement accounts or temporary accounts.
Because their balances are reset to zero at the end of each accounting period, typically a month or a year.
These accounts are use to track a company’s operating activities and are an important part of the financial reporting process. Revenue accounts are nominal accounts that are use to record sales and other income,.
While expense accounts are nominal accounts that are use to record the costs of goods sold, wages, rent, utilities, and other expenses.
At the end of an accounting period, the balances in These accounts are close to a special account call the income summary account.
Which is then close to the owner’s equity account or retain earnings account. This process is known as the closing process and is an important step in preparing financial statements.
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