{"id":11441,"date":"2023-02-16T11:10:19","date_gmt":"2023-02-16T05:40:19","guid":{"rendered":"https:\/\/razorpay.com\/blog\/?p=11441"},"modified":"2025-03-25T15:03:53","modified_gmt":"2025-03-25T09:33:53","slug":"nominal-account","status":"publish","type":"post","link":"https:\/\/razorpay.com\/blog\/business-banking\/nominal-account\/","title":{"rendered":"Role of Nominal Accounts for Small Businesses"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Startup businesses have limited working capital before they reach their break-even point. Keeping a thorough track of every fiscal transaction in a specific time period is crucial for sustenance and growth.<\/span><\/p>\n<p>In bigger businesses with multiple departments dealing with thousands of transactions, keeping track of accounts can get challenging.<\/p>\n<p><span style=\"font-weight: 400;\">A nominal account is the best solution to keep track of transactions in a segmented way, to avoid errors and mishaps at the end of the accounting period.\u00a0<\/span><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d0d224ca46b\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d0d224ca46b\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/nominal-account\/#What_is_a_Nominal_Account\" >What is a Nominal Account?\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/nominal-account\/#Nominal_Account_vs_Real_Account\" >Nominal Account vs Real Account<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/nominal-account\/#Rules_to_Be_Followed_for_Nominal_Accounts\" >Rules to Be Followed for Nominal Accounts\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/nominal-account\/#FAQs\" >FAQs<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/nominal-account\/#Can_nominal_accounts_represent_an_asset\" >Can nominal accounts represent an asset?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/nominal-account\/#Is_salary_account_a_nominal_account\" >Is salary account a nominal account?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/nominal-account\/#What_are_the_different_outcomes_of_a_nominal_account\" >What are the different outcomes of a nominal account?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What_is_a_Nominal_Account\"><\/span><b>What is a Nominal Account?\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">A nominal account is a general ledger maintained by a business. It keeps a detailed record of all the revenue generated, expenses made, and profits or losses documented by this company in a given financial year. This temporary account is closed by the company at the end of the financial year.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The account opens with a zero balance every accounting cycle. When it is closed, the net balance gets transferred to the capital account or retained earnings account of the company &#8211; based on its ownership structure.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Some common types of nominal accounts<\/span> <span style=\"font-weight: 400;\">include the following:<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>Sales Account: <\/b><span style=\"font-weight: 400;\">Contains details about all the sales transactions<\/span><\/li>\n<\/ul>\n<ul>\n<li aria-level=\"1\"><b>Purchase Account: <\/b><span style=\"font-weight: 400;\">Ledger account dedicated to recording inventory purchases\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li aria-level=\"1\"><b>Cash Account: <\/b><span style=\"font-weight: 400;\">A book where all the<a href=\"https:\/\/razorpay.com\/learn\/what-is-cash-transaction\/\"> cash transaction<\/a> data is collected\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li aria-level=\"1\"><b>Expense Account: <\/b><span style=\"font-weight: 400;\">Ledger to keep a tab on everyday expenses of an organization\u00a0<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Nominal_Account_vs_Real_Account\"><\/span><b>Nominal Account vs Real Account<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>There are three kinds of accounts used when recording financial transactions.<\/p>\n<ul>\n<li>Nominal Account<\/li>\n<li>Real Account<\/li>\n<li>Personal Account<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">The real account of a business takes into consideration the balance sheet, equities, assets, and <a href=\"https:\/\/razorpay.com\/learn\/what-is-liability-in-accounting\/\">liabilities<\/a> of the company. Some basic differences between such a real account and a nominal<\/span> <span style=\"font-weight: 400;\">account<\/span> <span style=\"font-weight: 400;\">are discussed below.\u00a0<\/span><\/p>\n<table>\n<thead>\n<tr>\n<th><b>Real Account\u00a0<\/b><\/th>\n<th><b>Nominal Account\u00a0<\/b><\/th>\n<\/tr>\n<tr>\n<th><span style=\"font-weight: 400;\">Permanent in nature\u00a0<\/span><\/th>\n<th><span style=\"font-weight: 400;\">Temporary in nature<\/span><\/th>\n<\/tr>\n<tr>\n<th><span style=\"font-weight: 400;\">At the end of a set time period, the balance can be carried over<\/span><\/th>\n<th><span style=\"font-weight: 400;\">At the end of the financial year, the account balance resets to zero\u00a0<\/span><\/th>\n<\/tr>\n<tr>\n<th><span style=\"font-weight: 400;\">The primary target is to record profits and losses<\/span><\/th>\n<th><span style=\"font-weight: 400;\">The primary target is to evaluate outstanding obligations and current assets<\/span><\/th>\n<\/tr>\n<\/thead>\n<\/table>\n<h2><span class=\"ez-toc-section\" id=\"Rules_to_Be_Followed_for_Nominal_Accounts\"><\/span><b>Rules to Be Followed for Nominal Accounts\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Financial experts refer to certain specific guidelines as the golden rules that a business must follow while maintaining a nominal account<\/span><b>. <\/b><span style=\"font-weight: 400;\">These include:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Debiting all of the expenses of the company<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Crediting every income received\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Debiting all the losses sustained by the organization<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Crediting all the gains earned\u00a0<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><b>Role of RazorpayX in Maintaining Nominal Accounts\u00a0<\/b><\/p>\n<p><a href=\"https:\/\/razorpay.com\/x\/\"><span style=\"font-weight: 400;\">RazorpayX<\/span><\/a><span style=\"font-weight: 400;\">, had laid significant emphasis on automating how commercial transactions are done by a company. As a result, keeping track of profits made or expenses borne by the organization can become comparatively hassle-free.\u00a0<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>How RazorpayX Helps with Invoice Tracking<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">For instance, with its <\/span><a href=\"https:\/\/razorpay.com\/x\/vendor-payments\/\"><span style=\"font-weight: 400;\">Vendor Payments<\/span><\/a><span style=\"font-weight: 400;\"> facility, it becomes easier for your business to follow proper bookkeeping practices regarding generated <a href=\"https:\/\/razorpay.com\/blog\/what-is-invoice\/\">invoices<\/a>. The software also ensures that your company remains compliant with the taxation regulations in place.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The facility also makes sure that maintaining a nominal account<\/span> <span style=\"font-weight: 400;\">becomes comparatively less time-consuming so that proper and effective resource allocation can be done in order to value-added production. To elaborate, with this platform, you can provide access to the challans, invoices, and other necessary documents to your Chartered Accountant with just a few clicks &#8211; ensuring the calculations can be done in minimal turn-around time.\u00a0<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>How RazorpayX Helps with Forex Record-Keeping\u00a0<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Although the nominal account is maintained for internal purposes, the records kept here can be crucial to corroborate the public records undergoing a statutory audit. Therefore, proper data entry regarding FDI inflow is essential.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">That is why signing up with <\/span><a href=\"https:\/\/razorpay.com\/x\/forex\/home\"><span style=\"font-weight: 400;\">RazorpayX Forex Funding<\/span> <\/a><span style=\"font-weight: 400;\">can be highly effective for a company. The dedicated team of experts on this platform is capable of providing your company with the necessary advice and guidance regarding staying compliant with the RBI guidelines when recording the foreign exchange inflow. Moreover, these specialists are enlisted to complete the paperwork necessary on your behalf.\u00a0<\/span><\/p>\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/razorpay.com\/x\/?r=blog_cta_business_banking_nominal_account&amp;utm_source=blog&amp;utm_medium=cta\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">Explore RazorpayX!<\/a><\/div>\n<h2><span class=\"ez-toc-section\" id=\"FAQs\"><\/span>FAQs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div><div id=\"rank-math-rich-snippet-wrapper\"><div id=\"rank-math-faq\" class=\"rank-math-block\">\n<div class=\"rank-math-list \">\n<div id=\"faq-1\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"Can_nominal_accounts_represent_an_asset\"><\/span>Can nominal accounts represent an asset? <span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Nominal accounts are not representative of any tangible asset. <\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-2\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"Is_salary_account_a_nominal_account\"><\/span>Is salary account a nominal account?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>A salary account is a nominal account. <\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-3\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"What_are_the_different_outcomes_of_a_nominal_account\"><\/span>What are the different outcomes of a nominal account? <span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Based on the matters under its purview, the final outcome of a nominal account can only be a record of profit generated or loss sustained. Therefore, this profited or lost amount is transferred to the current account of the business. <\/p>\n\n<\/div>\n<\/div>\n<\/div>\n<\/div><\/div><\/div>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Startup businesses have limited working capital before they reach their break-even point. Keeping a thorough track of every fiscal transaction in a specific time period is crucial for sustenance and growth. In bigger businesses with multiple departments dealing with thousands of transactions, keeping track of accounts can get challenging. A nominal account is the best<\/p>\n","protected":false},"author":106,"featured_media":11443,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[27],"tags":[440],"class_list":{"0":"post-11441","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business-banking","8":"tag-nominal-account"},"_links":{"self":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/11441","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/users\/106"}],"replies":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/comments?post=11441"}],"version-history":[{"count":3,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/11441\/revisions"}],"predecessor-version":[{"id":21669,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/11441\/revisions\/21669"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/media\/11443"}],"wp:attachment":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/media?parent=11441"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/categories?post=11441"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/tags?post=11441"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}