Question

Nominal A/c is debited when business incurs expenses.

• A. True
• B. False

Answer 1

The correct option is A True

Accounts which are related to expenses, losses, incomes or gains are called Nominal accounts. The dictionary meaning of the word "nominal" is "existing in name only" and the meaning remains absolutely true in accounting sense too, because nominal accounts do not really exist in physical form, but behind every nominal accounts money is involved. E.g. Purchase A/c, Salary A/c, Sales A/C. Commission Received A/c, etc.

The final result of all nominal accounts is either profit or loss which is then transferred to the capital account.

The golden rule for nominal account is : Debit all expenses and losses; Credit all incomes and gains.