Trading Securities
Definition: Held for short-term profit; FV through P&L
Scope:NarrowDifficulty:Moderate
Held for short-term profit; FV through P&L
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Purchase | ||
| Buy $10,000 of trading securities. | ||
| Trading SecuritiesAsset+ | $10,000 | |
| CashAsset− | $10,000 | |
| Held for short-term profit; current asset. | ||
| 2. Mark to market (gain) | ||
| Fair value rises to $10,800. | ||
| Trading SecuritiesAsset+ | $800 | |
| Unrealized Gain — TradingRevenue+ | $800 | |
| Unrealized gain reported on income statement. | ||
| 3. Sell | ||
| Sell for $10,800. | ||
| CashAsset+ | $10,800 | |
| Trading SecuritiesAsset− | $10,800 | |
| No additional gain—already recognized at fair value. | ||
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.
Trading SecuritiesTrading 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.
$10,000.00
$800.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$10,800.00
$0.00
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.
$10,800.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$10,000.00
$800.00
Unrealized Gain — TradingUnrealized Gain — TradingRevenueIncome 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.
$800.00
Normal bal. ▶
$800.00
DurationShort-Term
External Links
- Security (finance)#Trading securities — Wikipedia