what is nominal account

A nominal account is a type of general ledger account that is closed at the end of each accounting year. It is also known as a temporary account, as opposed to real accounts, which are permanent accounts. Nominal accounts are used to collect accounting transaction information for revenue, expense, gain, and loss transactions, all of which appear in the income statement. Examples of nominal accounts include revenue from the sale of services, cost of goods sold, and loss on the sale of an asset. At the end of the fiscal year, the balances in nominal accounts are transferred into permanent accounts, and the nominal accounts are reset to zero to accept a new set of transactions in the next fiscal year. Nominal accounts are important for accurately reflecting a companys financial performance and maintaining meticulous financial records.