what type of accounts are referred to as temporary or nominal accounts? what is meant by these terms?
Nominal accounts are income statement accounts and are also called 'temporary accounts' in contrast to balance sheet (asset, liability, and owners' equity) accounts which are called 'permanent accounts' or 'real accounts.'.
What is a temporary account? A temporary account is a general ledger account that begins each accounting year with a zero balance. At the end of the accounting year any balance in the account will be transferred to another account. This is referred to as closing the account. An example of a temporary account is the Sales account. The Sales account is used to keep a log of the sales occurring only in the current accounting year.