What are Permanent Accounts?
Also known as real or balance sheet accounts, these are general ledger entries that do not close at the end of an accounting period but are instead carried forward to subsequent periods . Real accounts, also known as permanent accounts, are quite different compared to their temporary equivalents. They persist from one accounting period to the next and maintain their balances over time unlike temporary accounts which are closed at the end of the period. These permanent files include assets, liabilities and equity sections making them very useful in showing the company’s financial position that lasts long.
Characteristics of Permanent Accounts:
- Persistence: Permanent accounts persist from one accounting period to the next. Their balances are not reset or closed out at the end of each period.
- Long-Term Focus: These accounts maintain their balances over time, providing a continuous record of the company’s financial position and performance.
- Reflect Financial Position: Permanent accounts, being balance sheet accounts, reflect the company’s financial position rather than its performance during a specific period.
- Include Assets, Liabilities, and Equity: Permanent accounts encompass various types of accounts, including assets, liabilities, and equity, which together depict the company’s financial health and resources.