Real account

A real account is an account that retains and rolls forward its ending balance from period to period. The areas in the balance sheet in which real accounts are found are assets, liabilities, and equity. Examples of real accounts are:

  • Cash
  • Accounts receivable
  • Fixed assets
  • Accounts payable
  • Retained earnings

Real accounts also include contra asset, contra liability, and contra equity accounts, since these accounts retain their balances beyond the current fiscal year.

Real accounts are not listed in the income statement. All of the balances in the revenue, expense, gain, and loss accounts (known as nominal or temporary accounts) listed in the income statement are flushed out to retained earnings at the end of each fiscal year, resulting in zero beginning balances in these accounts as of the beginning of the next fiscal year. Since retained earnings is a real account, this means that the balances in all nominal accounts are eventually shifted into a real account.

Auditors routinely review the contents of real accounts as part of their auditing procedures.

Similar Terms

Real accounts are also known as permanent accounts.