Examples of Real Accounts
Let’s assume you open a retail store and you possess a cash amount $50,000, fixed assets of $20,000 and inventory of $10,000. After running the store for few months, you generate revenue of say $60,000. Your cost of goods sold (COGS) amounted to $25,000, rent which you need to pay cost $2,500 and other additional expenses included $2,000.
Suppose your accounting period starts from 1st April to 31st March every year. At the end of the accounting or financial period, you report your revenue, cost of goods sold, rent and additional expenses on your profit/loss statement or income statement and find $30,500 as your net income. These accounts on your income statement are closed at the end of the accounting year.
The permanent accounts or the real accounts are carried over at the year-end. They are the retained earnings for the next year. Also, the real accounts become the opening balances at the beginning of the new accounting period. The opening balcne comprise the amount in cash, fixed assets and inventory accounts.