Nominal Account

 

Nominal Account

A nominal account is the type of account in which all accounting transactions are stored for one fiscal year, transferring balances to permanent accounts at the end of a fiscal year. This allows for resetting the balances to zero and starting afresh. Nominal accounts are usually related to Revenues, Expenses, Gains and Losses.

Golden Rule 3 says,Debit all expenses and losses, credit all incomes and gains.If a business incurs a loss or expense, then the books' respective entry is represented as a debit. If the business earns a profit or gains income by way of rendering services, then the entry in the book is represented as credit. An example below demonstrates this. A business pays rent for the premises it holds and is an expense for the business.

Date

Account

Debit

Credit

XXXX

Rent account

Rs.12000

 
 

Cash Account

 

Rs.12000

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