What is Real Accounts?
Real accounts, also called permanent accounts, are general ledger accounts that represent assets, liabilities, and equity. Their balances carry forward from one accounting period to the next rather than being closed at year end.
How It Works
- Identify accounts that record economic resources, obligations, or owners’ interest.
- Carry the closing balance of each real account into the next period’s opening balance.
- Use real accounts to build the balance sheet at each reporting date.
- Do not include real account balances in the period closing entries to retained earnings.
- Disclose changes in real accounts through the statement of changes in equity and notes.
Saudi Context
Saudi balance sheets prepared under IFRS as adopted by SOCPA consist entirely of real account balances. ZATCA reviews opening and closing real-account balances when reconciling the zakat base year over year.
Example
Cash, accounts receivable, inventory, fixed assets, accounts payable, and share capital are all real accounts. Their balances at 31 December become the opening balances on 1 January of the next year.