The term nominal accounts is sometimes used in place of the term temporary accounts.

The term nominal accounts is sometimes used in place of the term temporary accounts.

• A. True
• B. False
• C. Not sure
• D. Depends

Answer: (A)

Nominal accounts are the accounts that record revenues, expenses, gains, and losses for a specific period. They are used to measure performance over that period and, because their balances don’t carry forward, they are closed at the end of the period and reset to zero. The net result is transferred to owners’ equity (like retained earnings), which is why these accounts don’t persist into the next period. Because of this same behavior and role, many accounting texts refer to them as temporary accounts, and they are often called nominal accounts in that interchangeable sense. So the statement is true: the term nominal accounts is sometimes used in place of the term temporary accounts.

Nominal accounts are the accounts that record revenues, expenses, gains, and losses for a specific period. They are used to measure performance over that period and, because their balances don’t carry forward, they are closed at the end of the period and reset to zero. The net result is transferred to owners’ equity (like retained earnings), which is why these accounts don’t persist into the next period. Because of this same behavior and role, many accounting texts refer to them as temporary accounts, and they are often called nominal accounts in that interchangeable sense. So the statement is true: the term nominal accounts is sometimes used in place of the term temporary accounts.