What are permanent accounts?

• A. Revenue accounts.
• B. Temporary accounts used for the current period only.
• C. Accounts that reset at year end.
• D. Accounts that accumulate information across accounting periods.

Answer: (D)

Permanent accounts are the balance sheet accounts that carry their balances from one period to the next. They accumulate information across accounting periods, forming the ongoing financial position of the business. These include assets like cash and accounts receivable, liabilities like notes payable, and equity accounts such as common stock and retained earnings. Because they reflect what the company owns or owes at any point in time, their balances are not closed at year-end; they roll over into the next period.

In contrast, revenue and expense accounts are temporary; they capture activity for a specific period and are closed to zero at the end of the period so the new period starts fresh. Dividends are also treated as temporary because they affect equity in the current period and are closed as part of that period’s closing process. Hence, the statement that permanent accounts accumulate information across accounting periods best identifies their nature.