Definition Definition

Temporary & Permanent accounts

Temporary accounts relate only to a given accounting period. They include all income statement accounts and the owner’s drawing account. The company closes all temporary accounts at the end of the period.

Permanent accounts relate to one or more future accounting periods. They consist of all balance sheet accounts, including the owner’s capital account. Permanent accounts are not closed from period to period. Instead, the company carries forward the balances of permanent accounts into the next accounting period.

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