Legal Definitions - nominal account

A nominal account is an income-statement account that is closed into surplus at the end of the year when the books are balanced. This means that the account is used to record expenses and revenues for a specific period, such as a year, and then the balance is transferred to another account.

For example, a company's rent expense account is a nominal account. At the end of the year, the balance of this account is transferred to the company's retained earnings account. This process helps to keep the company's financial records organized and accurate.