Differences between real and nominal accounts

The year-end balance sheet includes the composition of various transactions in different accounts registered for that period. Businesses record transactions in multiple accounts, some of which include assets, stocks, liabilities, profits, income, losses, and expenses. The profit and loss, profit and loss accounts are then closed at the end of the year and are also called nominal accounts. Balances of assets, equity and liabilities are carried forward to the following year. These accounts are classified in the actual accounts.

What is a nominal account?

Nominal accounts are those whose balances are closed at the end of the financial year. These accounts are also recorded in the income statement. The income statement is a summary of income and expenses incurred in a given period. Nominal accounts start a new fiscal or accounting year in balance. In fact, the balance was closed last year and will not be transferred to the next year. The other name of a registered account is a temporary account. Balances in the income statement are accounts that were exchanged during this period. The final amount recorded in the financial statements is transferred to the equity category in the income statement. This final amount is called net profit or loss. The purpose of the registration of nominal accounts is to

What is a real account?

Actual accounts are those that are not closed at the end of a fiscal year. Actual accounts are recorded on the balance sheet. The balance sheet is a summary of the assets, equity and liabilities of the company. The term “real” used in this account refers to the continuous nature of the account type. This type of account is active throughout the accounting year. This is also called a permanent account. Account balances are carried over to the following year because they are not closed at the end of a period.

Differences between nominal and real accounts

Nominal accounts are also referred to as temporary accounts and are defined as the types of accounts that determine net loss and profit on balance sheets. Real accounts are also called permanent accounts and are open all year. The rest is postponed to the next exercise.

Account closing time

The nominal accounts are closed at the end of the year, the actual accounts are not closed at the end of an accounting period. They remain suspended and the rest refers to the balance sheet next year.

Type of account


The nominal account contains accounts such as income, profits, expenses and losses.

The actual account includes the types of asset, share and liability accounts.

Financial statement used

The nominal accounts are recorded in the profit and loss account of the company.

Real account transactions are recorded in the balance sheet.


The primary purpose of a nominal account is to determine the net profits and losses of a business. Actual accounts are used primarily to determine the financial position of the company compared to what it compared to what it owes.

Summary of nominal versus actual accounts

The main difference between real and nominal accounts is the type of accounts they hold. The nominal accounts are short-term and only last for the accounting period in which the transactions are made. Actual accounts continue until the next year. Nominal accounts are recorded in the income statement while the actual accounts are recorded in the balance sheet. Nominal accounts are called temporary accounts, while real accounts are permanent accounts. The types of accounts for the nominal account are revenues, expenses, losses and profits. The types of accounts under real accounts are assets, liabilities and equity. Different companies and organizations treat the two accounts differently depending on the nature of the transactions, the accounting principles followed and their overall impact on their operations.You can find difference between ca& acca

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