Answer to Question #64809 in Accounting for Jay

Question

What are realized gains/losses? What are unrealized gains/losses? When is each kind calculated, and where are they reported on the financial statements? Do you think the reporting requirements of these gains/losses adds to or detracts from the users' of financial statements understanding of the company?

Answer 1

A realized gain/loss results from selling an asset at a price higher/lower than the original purchase price.
An unrealized gain/loss occurs when a stock increases/decreases after an investor buys it, but he or she has yet to sell it.
Only realized gains/losses are reported on the financial statements.
I think that the reporting requirements of these gains/losses adds to the users' of financial statements understanding of the company.