What is a nominal account in accounting?

Nominal accounts in accounting are the temporary accounts, such as the income statement accounts. In other words, nominal accounts are the accounts that report revenues, expenses, gains, and losses. (The owner's drawing account is also a temporary account, even though it is not an income statement account.)

Nominal or temporary accounts are closed at the end of each accounting year. This means that their account balances are transferred to a permanent account. This closing process allows the nominal accounts to start the next accounting year with zero balances.

The balances from the income statement accounts will end up in the owner's equity account, if the enterprise is a sole proprietorship. If the business is a corporation, the balances will end up in the retained earnings account.