Which accounts are considered nominal accounts?

Which accounts are considered nominal accounts?

• A. Revenue and Expenses
• B. Assets
• C. Liabilities
• D. Owner's Equity

Answer: (A)

Nominal accounts are temporary accounts used to measure performance over a specific period. They track revenues and expenses (and related items) and are closed at the end of the period to reset to zero, with their net result (net income or net loss) flowing into equity for the next period. This temporary nature is what defines them as nominal: their balances do not carry forward. Permanent accounts, by contrast, keep their ending balances into the next period. These include assets, liabilities, and the long-running components of owner's equity, which reflect the ongoing financial position rather than a single period’s performance. So revenues and expenses fit the description of nominal accounts because they are used to compute the period’s net income and are closed out at period end.

Nominal accounts are temporary accounts used to measure performance over a specific period. They track revenues and expenses (and related items) and are closed at the end of the period to reset to zero, with their net result (net income or net loss) flowing into equity for the next period. This temporary nature is what defines them as nominal: their balances do not carry forward.

Permanent accounts, by contrast, keep their ending balances into the next period. These include assets, liabilities, and the long-running components of owner's equity, which reflect the ongoing financial position rather than a single period’s performance.

So revenues and expenses fit the description of nominal accounts because they are used to compute the period’s net income and are closed out at period end.