Answer to Question #239919 in Economics for Tenn

Question

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.

Answer 1

Accounts are accounts that keep records of all business transactions of an organization using the double entry method.

Accounting accounts are a method of grouping the reflection of transactions, liabilities and assets.

For each type of property, liabilities and transactions, separate accounts are opened with their own name and digital number (code), which correspond to each balance sheet item.

Each account is a two-sided table. The left side of the account is debit (from the Latin "must"), the right side is the credit (from the Latin "believes"). Thus, the accounting accounts reflect:

Debit turnover. It is the sum of all transactions that are reflected in the corresponding part of the account without the opening balance.

Credit turnover. It represents, respectively, the amount of transactions reflected in the credit of the account without the opening balance.

Balance at the beginning and end of the period. In this case, the balance at the end of the period is determined by information on the initial balance and credit and debit turnovers.