Why nominal accounts are not balanced in ledger. what is the difference between direct expenses and indirect expenses?
Direct expenses are expenses that are related to core activities of the business such as expenses incurred while production of goods or expenses on purchase of goods etc. While the indirect expenses are those while are related to expenses on other non-core activities such as rent, expenses related to sales,etc.
Nominal accounts include the accounts relating to the expenses and incomes of the firm. These accounts do not require balancing as the main purpose of opening the nominal account is to ascertain the net profit or loss of the firm all such accounts are transferred to the trading and profit and loss account of the firm at the end of the financial period. Accounts related to goods such as purchases account, sales account, purchase returns account, sales return account and stock account are not balanced. These accounts are closed by transferring them to trading account at the end of the year.