Real accounts

Written by Fmi.Online Monday November 14, 2022
A real account is a permanent account in the general journal that does not close at the end of a period. In other words, these accounts stay open allowing their balances to accumulate and carry over to the next period for the company’s lifetime.    

Explanation: 

  Real accounts reflect the current and ongoing financial status of a company because they carry their balance forward into the next accounting period. These accounts are typically reported on the balance sheet at the end of the year as assets, liabilities, or equity.These account balances change throughout the accounting period. Management can review the extent of these changes by comparing the initial and final balance of each account. The final balance will become reported on the balance sheet at the end of the period and will be carried over to the next period becoming the initial balance for the next accounting period.The relationship between real and nominal accounts is that a change in one of them might derive in a change on the other. This means that if a nominal account increases or decreases it will increase or decrease a permanent account.    

In a nutshell: 

  • A Real Account is a general ledger account relating to Assets and Liabilities other than people accounts
  • These are accounts that don't close at year-end and are carried forward.
  •  An example of a Real Account is a Bank Account.
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