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What is a real account?

A real account is a general ledger account that does not close at the end of the accounting year. In other words, the balances in the real accounts are carried over to become the beginning balances of the next accounting period.

Generally, the real accounts are the balance sheet accounts. Balance sheet accounts are the asset accounts (cash, accounts receivable, buildings, etc.), liability accounts (notes payable, accounts payable, wages payable, etc.), and stockholders' equity accounts (common stock, retained earnings, etc.).

Real accounts are also referred to as permanent accounts.

On the other hand, the income statement accounts (revenues, expenses, gains, losses) are known as temporary accounts because their balances are not carried over to the next accounting period. The income statement accounts begin each new accounting year with zero balances.