Temporary accounts include all revenue accounts, expense accounts, and in the case of sole proprietorships and partnerships, drawing or withdrawal accounts. Purchases, Purchase Discounts, and Purchase Returns and Allowances (under periodic inventory method) are also temporary accounts.

What kind of account is other income?

other income in Accounting Other income is income that does not come from a company’s main business, such as interest. Examples of other income include income from interest, rent, and gains resulting from the sale of fixed assets.

Why are income statement accounts called temporary accounts?

Income statement accounts are used to sort and store transactions involving revenues, expenses, gains, and losses. The income summary account is also an income statement account. Income statement accounts are described as temporary accounts because at the end of each accounting year the balances in the income statement accounts will be closed.

Where does the balance go in a temporary account?

The balance in the drawing account is transferred directly to the owner’s capital account and will not be reported on the income statement or in an income summary account. Temporary accounts are also referred to as nominal accounts.

Why are temporary accounts closed at the end of a period?

Temporary accounts refer to accounts that are closed at the end of every accounting period. These accounts include revenue, expense, and withdrawal accounts. They are closed to prevent their balances from being mixed with those of the next period. Also known as: Nominal accounts, Income statement accounts. Contents:

Why are income statement accounts called Nominal accounts?

Income statement accounts are also referred to as temporary accounts or nominal accounts because at the end of each accounting year their balances will be closed. This means that the balances in the income statement accounts will be combined and the net amount transferred to a balance sheet equity account.