What type of information is contained in nominal accounts, and what type in real accounts?
Financial accounting refers to an accounting framework that is used in the preparation and presentation of financial reports or statements. The financial information must be prepared according to acceptable accounting standards. The statements prepared are used by various stakeholders to make useful investment decisions.
Answer and Explanation:
Nominal accounts refer to those accounts that get closed at the close of a financial period. This implies that the balance in nominal accounts is not forwarded to another financial year. The nominal accounts balance usually gets transferred to capital accounts at the end of a fiscal year. The information contained in nominal accounts is usually income statement accounts such as:
- Revenue accounts
- Expense accounts
- Gain and loss account
Real accounts, on the other hand, are never closed when an accounting period comes to an end. They are also known as capital accounts. Real accounts contain balance sheet accounts such as
- Asset account
- Liability account
- Stockholder?s equity account.
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Learn more about this topic:
from Accounting 201: Intermediate Accounting IChapter 12 / Lesson 1