Course Outline
Join PRO

What is a temporary account?

Author:
Harold Averkamp, CPA, MBA

Definition of Temporary Account

A temporary account is a general ledger account that begins each accounting year with a zero balance. Then at the end of the year its account balance is removed by transferring the amount to another account. This is done through closing entries. Temporary accounts are also referred to as nominal accounts.

All of the income statement accounts are classified as temporary accounts. A few other accounts such as the owner’s drawing account and the income summary account are also temporary accounts.

Examples of Temporary Accounts

Temporary accounts include all of the various groups of income statement accounts:

Having temporary income statement accounts makes for easy reporting of each year’s details. After the amounts for the year have been reported on the income statement, the balances in the temporary accounts will end up in a permanent account such as a corporation’s retained earnings account or in a sole proprietor’s capital account. (In a manual system, the balances in the income statement accounts will first be closed to an income summary account. Next, the income summary balance will be transferred to the corporation’s retained earnings or to the sole proprietor’s capital account.)

A temporary account that is not an income statement account is the proprietor’s drawing 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.

Join PRO to Track Progress

Advance Your Accounting and Bookkeeping Career

Must Watch image

  • Perform better at your job
  • Get hired for a new position
  • Understand your small business
  • Pass your accounting class
Watch the Video
Certificates of Achievement

Earn Our Certificates of Achievement

Certificates of Achievement
  • Debits and Credits
  • Adjusting Entries
  • Financial Statements
  • Balance Sheet
  • Income Statement
  • Cash Flow Statement
  • Working Capital and Liquidity
  • Financial Ratios
  • Bank Reconciliation
  • Accounts Receivable and Bad Debts Expense
  • Depreciation
  • Payroll Accounting
View PRO Plus Features

Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials

Read all 2,797 reviews

Features

PRO

PRO Plus

Features
Lifetime Access (One-Time Fee)
Explanations
Quizzes
Q&A
Word Scrambles
Crosswords
Bookkeeping Video Training
Financial Statements Video Training
Flashcards
Visual Tutorials
Quick Tests
Quick Tests with Coaching
Cheat Sheets
Bookkeeping Study Guide
Managerial Study Guide
Business Forms
All PDF Files
Progress Tracking
Earn Badges and Points
Certificate - Debits and Credits
Certificate - Adjusting Entries
Certificate - Financial Statements
Certificate - Balance Sheet
Certificate - Income Statement
Certificate - Cash Flow Statement
Certificate - Working Capital
Certificate - Financial Ratios
Certificate - Bank Reconciliation
Certificate - Accounts Receivable and Bad Debts Expense
Certificate - Depreciation
Certificate - Payroll Accounting
Motivational Badges
Motivational Points
Medal Rankings
Activity Streaks
Custom Public Profile Page of Achievements

About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

Read 2,797 Testimonials

Take the Tour Join Pro Upgrade to Pro Plus