Accounting for Investments Investments in the bonds (debt) or stock of other companies: Assets Record at full cost (including brokerage fees). For debt investments record: Interest Receivable & Interest Revenue at year-end if necessary. Record gain or loss when investments are sold.
Valuing and Reporting Investments Unrealized Gains / Losses when the value of investments increases or decreases unrealized: the firm hasn’t sold the investments yet 12-31-03Value of stock investment increased by $1,300 during the year. Market Adjustment - ???1,300 Unrealized Gain - ???1,300
Trading Securities 48,200 Mkt Adj - Trading 1,300 Market Adjustment an adjustment to the value of the investments account total value of the investment is $49,500 trading securities are those investments that are held for sale in the near term separate accounts for “available- for-sale” securities that might not be sold in the near term
Unrealized Gain / Loss unrealized gains on trading securities are reported as an increase in net income Unreal Gain - Income 1,300 unrealized gains on available- for-sale securities are reported as an increase in retained earnings Unreal Gain - Equity 1,300