Definition of Permanent Account
In accounting, a permanent account refers to a general ledger account that is not closed at the end of an accounting year. The balance in a permanent account is carried forward to the subsequent year, where it becomes the beginning balance for the new year.
Permanent accounts are also known as real accounts.
Examples of Permanent Accounts
Generally, the balance sheet accounts are permanent accounts, except for the owner’s drawing account which is a balance sheet account and a temporary account. (The owner’s drawing account is a temporary account because its balance is closed to the owner’s capital account at the end of each year in order to begin the next year with a $0 balance.)
Examples of permanent accounts are:
- Asset accounts including Cash, Accounts Receivable, Inventory, Investments, Equipment, and others
- Liability accounts such as Accounts Payable, Notes Payable, Accrued Liabilities, Deferred Income Taxes, etc.
- Owner’s (Stockholders’) equity accounts including Owner’s Capital, Common Stock, Retained Earnings, and others
