Similarities & Differences Between Temporary Accounts And Permanent Accounts

Temporary And Permanent Accounts / Temporary Accounts VS Permanent Accounts

Temporary Accounts are closed to Income Summary Account which is also closed Income Statement at the end of the accounting period while Permanent Accounts are transferred to balance sheet and closed only on the Liquidation of the business.

Temporary accounts show the profitable or earning activities of the owners of the business for the period while permanent accounts show the financial position of the business on particular time.

Examples of temporary accounts are Revenues, Expenses, Gains, Losses while examples of Permanent accounts are Assets, Liabilities and Equity.

Temporary accounts are shown only in Adjusted Trial Balance while permanent accounts are also shown in Post-Closing Trial Balance.

Similarities Between Temporary Accounts And Permanent Accounts

Both are the parts of Financial Statements.

 

The investors are interested to know both financial performance and financial position of the business. Financial performance is measured through Income Statement which includes revenues and expenses (temporary accounts) in order to calculate Net Income or Net Loss for the period while financial position is measured with the use of balance sheet which is a statement of assets, liabilities and equity  (permanent accounts) on a particular time.