100%(1)1 out of 1 people found this document helpful
This preview shows page 1 - 2 out of 3 pages.
Adam CrawfordAcc#111 #36714Adalo06211Temporary and Permanent Accounts in the Account CycleThe accounting cycle is a multi-step process, one very important step is the closing process. To fully understand this step there are a few things that one must understand. Accounts are classified in many different ways in accounting. Two types of accounting classifications are temporary and permanent. Quite simply, the difference between the two lies in the definition. Temporary is an adjective and it is defined as “lasting, existing, serving, or effective for a time only; not permanent” (Dictionary.com). Permanent can be defined as “existing perpetually; everlasting, especially without significant change.” (Dictionary.com). Permanent accounts are company accounts whose balances are carried over from one accounting period to another. The permanent accounts are asset, liability and owner equity accounts with the exception of the owner withdrawal account. Items that a company owns are assets. Items that a company owes are represented as liabilities.