What are nominal accounts?

Definition of nominal accounts

Nominal accounts are the categories in your records where transactions are posted in double-entry bookkeeping.

Nominal accounts are sometimes called ‘accounts’ for short. They are divided into accounts for:

• assets,
• liabilities,
• income,
• expenses or costs,
• and capital.

The list of all your business’s nominal accounts, and the transactions they contain, is called your business’s ‘nominal ledger’ or ‘general ledger’.

The list of your business’s nominal accounts, without the transactions they contain, is called your business’s ‘chart of accounts’.

How nominal accounts work in double-entry bookkeeping

When you sell some services and your customer pays you straight away, the amount of money in your bank account (the nominal account ‘bank account’) goes up, and the amount of sales you’ve made (the nominal account ‘sales’) also goes up.

The nominal account for your bank account should add up to the same as what actually is in the bank. This is called a ‘bank reconciliation’.