What is a Permanent Account?
Each account in an bookkeeping system can be classified as a permanent account or a temporary account.
A permanent account is a balance sheet account including all asset, liability, and equity accounts.
These accounts are permanent because they are not closed at the end of each accounting period. At the start of the new accounting period, the closing balance from the previous accounting period is brought forward and becomes the new opening balance on the account.
A permanent account is in contrast to a temporary account.
At the end of the accounting period, the balance is transferred to the income statement and the account is closed with a zero balance. At the start of a new accounting period, an account will be opened only if there are transactions relating to that account.
An example of a temporary account would be the insurance expense account.
For further information see the Wikipedia Permanent and temporary accounts definition.
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