Permanent (real) accounts

Definition

Permanent (real) accounts are those that carry their balances into the next accounting period. They include asset, liability, and equity accounts on the balance sheet.

5 Must Know Facts For Your Next Test

1. Permanent accounts are not closed at the end of an accounting period.
2. They appear on the balance sheet rather than the income statement.
3. Examples include cash, accounts receivable, and retained earnings.
4. The balances in these accounts are carried over to the next accounting period to show cumulative totals.
5. Unlike temporary accounts, permanent accounts help track a company's financial position over multiple periods.

Review Questions

Related terms

Temporary (nominal) Accounts: Accounts that are closed at the end of each accounting period and include revenue, expense, and dividend accounts.

Closing Entries:

Journal entries made at the end of an accounting period to transfer balances from temporary to permanent accounts.

Retained Earnings:

A permanent account that shows accumulated net income minus dividends distributed to shareholders.