Which is not a temporary account

General
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which is not a temporary account

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Which is not a temporary account?

Answer: In accounting, various types of accounts are used to track a company’s financial activities. These accounts are generally categorized into permanent (real) accounts and temporary (nominal) accounts.

Permanent Accounts (Real Accounts):

  1. Assets:

    • Cash
    • Accounts Receivable
    • Inventory
    • Equipment

  2. Liabilities:

    • Accounts Payable
    • Loans Payable
    • Mortgage Payable

  3. Equity:

    • Common Stock
    • Retained Earnings

Temporary Accounts (Nominal Accounts):

  1. Revenues:

    • Sales Revenue
    • Service Revenue

  2. Expenses:

    • Rent Expense
    • Salary Expense
    • Utilities Expense

  3. Gains and Losses:

    • Gain on Sale of Asset
    • Loss on Sale of Asset

The primary distinction is that temporary accounts accumulate data for a single accounting period and are closed at the end of each period to start afresh in the new period. In contrast, permanent accounts carry their balances forward from one period to the next.

Given this information, a permanent account is one that is not temporary. Examples of permanent accounts include:

  • Assets (e.g., Cash, Equipment)
  • Liabilities (e.g., Accounts Payable, Loans Payable)
  • Equity (e.g., Common Stock, Retained Earnings)

Therefore, an account like “Retained Earnings” or “Cash” is not a temporary account. These accounts remain open and their balances are carried forward to the subsequent accounting periods.