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Journal Entries of Unrealized Earning

Unrealized earning means that earning which we can find by knowing the increase in the market value of our asset. It is also called unrealized gain or revenue. If we see that today our share rate is Rs. 500 but we have bought it one day ago at the rate of Rs. 400. So, today our unrealized earning will be Rs. 100. Like this, we
see our other assets value increase. So, showing our balance sheet under marked to market, we have to pass the journal entry of unrealized earning. Unrealized earning is different from outstanding earning. In unrealized earning or gain, we just get paper information that our asset's value has increased. So, we have this gain but in the outstanding earning, we sell our asset but we did not received money in cash. Following journal entry will be pass in the case of unrealized earning.

Asset account Debit

Unrealized Earning account Credit

Now ,  discuss why did we debit the asset account and why did, we credit the unrealized earning.

We have debited asset account because value of asset has increased. Every increase in the value of asset is debited. If value of share has increased with Rs. 100. We will debit our share investment account with Rs. 100. We credited the unrealized earning account because we have to credited all the earning.



Important :


As per historical cost concept, we will not write above entry because we keep all the assets on their historical cost rather than their market value but now latest GAAP requirement, financial instruments like shares and stock will be kept in the financial statement at their market value rather than their historical cost. So, above entry is important for showing the correct net income in   the income statement and financial position in the balance sheet. 

COMMENTS

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  1. Ya it is new entry sir. Thank u for updated like these entries.

    ReplyDelete
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Accounting Education: Journal Entries of Unrealized Earning
Journal Entries of Unrealized Earning
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Accounting Education
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