What are Real Accounts?
Real accounts, also known as permanent accounts, are types of accounts in accounting that represent tangible assets, liabilities, and equity. In accounting, there are mainly three main types of accounts. The second one is the Real Account or the permanent account. This type of general ledger account does not have a closure at the end of a financial year, rather the closing balances are accumulated and carried over to the next accounting period or financial year. In simple terms, the closing balance of the previous accounting year becomes the opening balance of the current accounting year. Thus, these real accounts are termed permanent accounts as the account remains open throughout the entity’s life.
The golden rule of real account is, Debit what is coming in and Credit what is going out.
Key Takeaways:
- Real accounts are also known as permanent and perpetual accounts as the closing balance of the current year is carried forward to the succeeding accounting year as the opening balance.
- Real accounts are listed on a balance sheet of an organization under assets, liabilities and equities categories.
- In accounting, real accounts depict the accounts related to the assets, liabilities, and equity. Also, contra assets, contra liabilities, and contra equity accounts are included in the real accounts.
- Real accounts are different from nominal accounts or temporary (personal accounts).
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