Final answer:
Temporary accounts in accounting are designed to accumulate transactions for a single accounting period and include Revenue and Expense accounts. They are zeroed out to equity accounts like Retained Earnings on the balance sheet after the period ends.
Step-by-step explanation:
Temporary Accounts in Accounting
Temporary accounts in accounting are those meant to collect balances for a single accounting period and are then zeroed out to a permanent equity account at the end of the period. This process is part of the closing entries in accounting. Two common examples of temporary accounts are Revenue and Expense accounts. Revenue accounts record the income a company earns from selling goods or services within an accounting period. Expense accounts track the costs incurred by the business in generating revenues during the same period.
After the accounts have served their purpose for the period, they are closed to a permanent account, usually Retained Earnings, which is a part of the equity section on a company's balance sheet. A T-account is a graphical representation of a ledger account that shows the effect of transactions on an account, and it helps in understanding where the temporary accounts fit on the ledger. Unlike a time deposit account, which is designed for saving over a longer period, temporary accounts are strictly for tracking transactions within an accounting period before being transferred to permanent equity.