Unrealized Gain/Loss

Unrealized gain/loss is an accounting term used to describe the difference between the current market value of an asset and its original purchase price. It is also known as a paper gain/loss, as it is not realized until the asset is sold. Unrealized gains and losses are not included in the income statement, but are instead reported in the balance sheet as a component of shareholders’ equity.

History of Unrealized Gain/Loss

The concept of unrealized gain/loss has been around since the early days of accounting. It was first introduced in the early 19th century by the French economist Jean-Baptiste Say. Say argued that the value of an asset should be determined by its current market value, rather than its original purchase price. This concept was later adopted by the accounting profession and is now widely used in financial reporting.

The concept of unrealized gain/loss is closely related to the concept of realized gain/loss. Realized gain/loss is the difference between the sale price of an asset and its original purchase price. It is reported in the income statement as a component of net income. In contrast, unrealized gain/loss is not reported in the income statement, but is instead reported in the balance sheet as a component of shareholders’ equity.

Comparison Table

Summary

Unrealized gain/loss is an accounting term used to describe the difference between the current market value of an asset and its original purchase price. It is not reported in the income statement, but is instead reported in the balance sheet as a component of shareholders’ equity. For more information about unrealized gain/loss, please visit the websites of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB).

See Also

• Realized Gain/Loss
• Market Value
• Original Purchase Price
• Income Statement
• Balance Sheet
• Shareholders’ Equity
• FASB
• IASB
• Accounting Principles
• Financial Reporting

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