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What is the accounting treatment of unrealized gain / loss on trading securities ?

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Question added by Mohamed Azzam , Head Of finance Department , Dr. Bakhsh Hospitals Group
Date Posted: 2014/04/16
SREEDEVI SUNILKUMAR
by SREEDEVI SUNILKUMAR , Business finance officer , Emirates Airline

The treatment of unrealized gains or losses in the financial statements depends on whether the securities are classified as held to maturity, trading, or available for sale. Unrealized gains or

Losses on securities classified as held to maturity are not recognized in the financial

Statements; they have no effect on the balance sheet, income statement, and statement of

Cash flows. Even so, many companies choose to disclose the market value of the securities

as part of the narrative description or in the footnotes that accompany the statements.

Whether or not the market value is disclosed, held-to-maturity securities are reported

on the balance sheet at amortized cost.

Investments classified as trading securities are reported in the financial statements

at fair value. Unrealized gains or losses on trading securities are recognized in net

income even though the securities have not been sold. The gain increases net income,

which in turn increases retained earnings. Unrealized gains and losses have no effect on

cash flows.

Investments classified as available-for-sale securities are also reported in the financial

statements at fair value. However, an important distinction exists with respect to

how the unrealized gains and losses affect the financial statements. Even though unrealized

gains or losses on available-for-sale securities are included in the assets on the balance

sheet, they are not recognized in determining net income. increase is reported in a separate equity account called Unrealized Gain or Loss on Available-for-Sale Securities. The statement of cash flows is not affected by recognizing unrealized gains and losses on available-for-sale securities

can i have more clarification about that matter.....is it mandatory to recognize unrealized gain or loss in case of trading shares investment  

Deleted user
by Deleted user

Enter on debit side of Profit & Loss account if u loss, and enter on credit side if u gain...

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