Discussion foorum week 3 PDF

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Discussion forum unit 3...

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The full "accounting cycle" which culminates in closing the books and producing financial statements. Discuss the differences between Permanent "real" accounts and Temporary ¨nominal¨ accounts:   

What type of information is contained in nominal accounts, and what type of information is contained in real accounts? Which financial statement contains the information from nominal accounts and which contains the information from real accounts? Provide an example of real accounts and an example of nominal accounts.

Your Discussion should be a minimum of 250 words in length and not more than 450 words. Please include a word count. Following the APA standard, use references and intext citations for the textbook and any other sources.

On one hand, a nominal account can be referred to as a temporary account because normally the balance of a nominal account is closed at the end of an accounting year. At the beginning of each accounting year, a nominal account will start at a zero balance. On the other hand, a real account is not closed at the end of an accounting year, moreover, a real account can be viewed as a permanent account. (Franklin et al., 2020). What type of information is contained in nominal accounts, and what type of information is contained in real accounts? Nominal accounts or temporary accounts' balances are transferred to the real or permanent account at the end of the fiscal year. This means that nominal accounts' balances will be a zero balance. However, the accounting transactions will appear on the income statement as revenues, expenses, gains, and losses. When these accounts balances are zeroed at the end of a fiscal year the balances of nominal accounts are directly transferred to retained earnings or can be first transferred to an income summary account. (Franklin et al., 2020). Real accounts or permanent accounts’ balances are resumed by the end of the fiscal year into new ones. The sections of the balance sheet where real accounts are presented are in the assets, liabilities, and equity. Examples of real accounts are cash, accounts receivable, fixed assets, accounts payable, retained earnings, contra asset, contra liability, and contra equity accounts. (Franklin et al., 2020). Also, real accounts will not be visible in an income statement. However, nominal accounts' balances (revenue, expense, gain, and loss accounts) will be visible at the beginning of the fiscal year on the income statement. At the end of the fiscal year, the nominal accounts will be shifted into real accounts. Which financial statement contains the information from nominal accounts and which contains the information from real accounts? Nominal accounts will be presented in journal entries. Journal entries are at the beginning of the accounting cycle, when the journal entries are closed it will show how the balance in the nominal account is shifted through an income summary account to the retained earnings account. (Franklin et al., 2020). A real account refers to the permanent nature, this means that the account is active from the first day to the last day of business. A real account contains the balances of the company’s assets, liabilities, and owner’s equity at a specific point in time. (Franklin et al., 2020). word count: 413

Reference: Franklin, M. Graybeal, P. & Cooper, D. (2020). Principles of accounting, volume 1: Financial accounting. Open Stax Rice University. https://openstax.org/details/books/principles-financialaccounting...