Temporary accounts include all of the income statement accounts: revenues, expenses, gains, losses. 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 manual systems, the balances in the temporary accounts will be transferred to an income summary account. Next the income summary account will be transferred to retained earnings or to the owner's capital account. Hence, the income summary account is also a temporary 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.
Temporary accounts are also referred to as nominal accounts.
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