What Is A Temporary Account? | AccountingCoach

What is a temporary account?

For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Read more →

Author: Harold Averkamp, CPA, MBA

Definition of Temporary Account

A temporary account is a general ledger account that begins each accounting year with a zero balance. Then at the end of the year its account balance is removed by transferring the amount to another account. This is done through closing entries. Temporary accounts are also referred to as nominal accounts.

All of the income statement accounts are classified as temporary accounts. A few other accounts such as the owner’s drawing account and the income summary account are also temporary accounts.

Examples of Temporary Accounts

Temporary accounts include all of the various groups of income statement accounts:

• Revenues
• Expenses
• Gains
• Losses

Having temporary income statement accounts makes for easy reporting of each year’s details. After the amounts for the year have been reported on the income statement, the balances in the temporary accounts will end up in a permanent account such as a corporation’s retained earnings account or in a sole proprietor’s capital account. (In a manual system, the balances in the income statement accounts will first be closed to an income summary account. Next, the income summary balance will be transferred to the corporation’s retained earnings or to the sole proprietor’s capital account.)

A temporary account that is not an income statement account is the proprietor’s drawing account. The balance in the drawing account is transferred directly to the owner’s capital account and will not be reported on the income statement or in an income summary account.

Join PRO and Perform Better At My... Accounting job Watch Bookkeeping job Watch Job interview Watch Small business Watch Class / students Watch

Related Questions

• What is the difference between an adjunct account and a contra account?
• Is depreciation a temporary account?
• What are current liabilities?
• What is a permanent account?
• Why and how do you adjust the inventory account in the periodic method?
• What is the difference between a nominal account and a real account?

Related In-Depth Explanations

• Accounting Basics
• Accounting Equation
• Bookkeeping
• Chart of Accounts
• Income Statement

Join PRO to Track Progress Mark the Question as Read WATCH NOW Advance Your Career with Our PRO Training Perform better at my accounting job Watch Video Perform better at my bookkeeping job Watch Video Get hired in a new position Watch Video Understand my small business Watch Video Pass my class Watch Video

Features

Free

PRO

Lifetime Access (One-Time Fee) Explanations Quizzes Q&A Dictionary Bookkeeping Video Training Financial Statements Video Training Visual Tutorials Quick Tests Quick Tests with Coaching Cheat Sheets Flashcards Crossword Puzzles Word Scrambles with Coaching Bookkeeping Study Guide Managerial and Cost Accounting Study Guide Certificates of Achievement Bookkeeping Certificate of Excellence Business Forms Printable PDF Files Progress Tracking Motivational Badges and Points Motivational Medal Rankings Motivational Activity Streaks Public Profile Page of Achievements Dark Mode

About the Author

For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

Read 3,034 Testimonials

PRO for Teams

• Easily add new users and team admins
• Monitor individual user progress and grades
• Monitor team progress and compare users
• View average grades and find problem areas
• Monitor recent activity and user achievements