Livestock Economics, Marketing and Business Management

NOMINAL ACCOUNTS

• These accounts are opened in the books to simply explain nature of transactions.
• They do not really exist. For e.g. in a business, salary is paid to manager, rent is paid to landlord, while salary, rent as such do not exist.
• The accounts of these items are opened simply to explain how the cash has been spent.
• In the absence of such information, it may be difficult for a person concerned to explain how cash was utilised.
• Nominal accounts include accounts of all expenses, losses, incomes and gains.
• The examples of such accounts are rent, insurance, dividends, and loss by fire etc.
• The rule is
  • Debit all expenses and losses
  • Credit all gains and incomes