Final answer:
Temporary accounts are closed each fiscal period and include revenue and expense accounts. Permanent accounts remain open and include assets, liabilities, and equity accounts from the balance sheet.
Step-by-step explanation:
The correct answer to the student's question is: 'Temporary Account is a temporary account and is closed at the end of a fiscal period, while Permanent Account is a permanent account and remains open at the end of the fiscal period.' Therefore, the answer is option 3) Temporary Account, Permanent Account.
Temporary accounts include all of the income statement accounts, which relate to revenue and expenses. These are measured over a specific period and then closed and transferred to a permanent equity account, commonly referred to as Retained Earnings. Examples of temporary accounts include Sales, Cost of Goods Sold, and various expense accounts.
On the other hand, permanent accounts are those accounts reported in the balance sheet, like assets, liabilities, and equity accounts, and they carry their end-of-period balances into the next fiscal period. The T-account structure can help visualize the balance sheet's two-column format, with its distinctive 'T-shape' separating assets on the left from liabilities and net worth (or equity) on the right.