Available-for-Sale AFS Securities
Definition: FV through OCI
Scope:ModerateDifficulty:Difficult
FV through OCI
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Purchase | ||
| Buy $20,000 of AFS securities. | ||
| AFS SecuritiesAsset+ | $20,000 | |
| CashAsset− | $20,000 | |
| Classified as available-for-sale. | ||
| 2. Fair value adjustment (gain) | ||
| Fair value rises to $21,500. | ||
| AFS SecuritiesAsset+ | $1,500 | |
| OCI — Unrealized GainEquity+ | $1,500 | |
| Unrealized gain goes to OCI, not net income. | ||
| 3. Sell | ||
| Sell for $21,500. | ||
| CashAsset+ | $21,500 | |
| AFS SecuritiesAsset− | $20,000 | |
| OCI — Unrealized GainEquity− | $1,500 | |
| Gain on Sale of InvestmentsRevenue+ | $3,000 | |
| OCI reclassified to income; realized gain recognized. | ||
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.
AFS SecuritiesAFS SecuritiesAssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$20,000.00
$1,500.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$20,000.00
$1,500.00
CashAsset account. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$21,500.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$20,000.00
$1,500.00
OCI — Unrealized GainOCI — Unrealized GainEquityThe owner’s residual interest in the business. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$1,500.00
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$1,500.00
Normal bal. ▶
$0.00
Gain on Sale of InvestmentsGain on Sale of InvestmentsRevenueIncome earned from business operations. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$3,000.00
Normal bal. ▶
$3,000.00
DurationShort & Long-Term
External Links
- Available for sale — Wikipedia