Which statement best describes permanent accounts (real accounts)?

Which statement best describes permanent accounts (real accounts)?

• A. Temporary accounts accumulate information from one fiscal period to the next
• B. Closing entries are used to prepare temporary accounts for a new period
• C. Permanent accounts accumulate information from one fiscal period to the next
• D. Post-closing trial balance is prepared after closing

Answer: (C)

Permanent accounts, also called real accounts, are the balances that carry forward from one fiscal period to the next. They appear on the balance sheet and include assets, liabilities, and equity. Because their balances are not reset at period end, they start the new period with the same or updated totals as the ending balances from the prior period. This is why they’re described as accumulating information over time. Temporary accounts—such as revenues, expenses, and withdrawals—are the ones that are closed out at the end of a period, resetting them to zero so the new period can start fresh. The post-closing trial balance, prepared after closing, includes only permanent accounts since temporary accounts have been reset. The statement that best describes permanent accounts is that they accumulate information from one fiscal period to the next.

Permanent accounts, also called real accounts, are the balances that carry forward from one fiscal period to the next. They appear on the balance sheet and include assets, liabilities, and equity. Because their balances are not reset at period end, they start the new period with the same or updated totals as the ending balances from the prior period. This is why they’re described as accumulating information over time.

Temporary accounts—such as revenues, expenses, and withdrawals—are the ones that are closed out at the end of a period, resetting them to zero so the new period can start fresh. The post-closing trial balance, prepared after closing, includes only permanent accounts since temporary accounts have been reset. The statement that best describes permanent accounts is that they accumulate information from one fiscal period to the next.