Question

What is meant by an unrealized gain or loss and what classification of investments it applies to ?

Answer 1

Unrealized profit or loss are those profits or losses that have only taken plape on paper, but the related transactions have not been yet taken place or completed. That is why unrealized gain or loss is also called paper profit or paper loss, that has not been realized actually.

This unrealized gain will not be realized until the related transaction is completed.Unrealized profit is shown in the accumulated other comprehensive income account in the sharehosders’ equity section of the balance sheet.

The concept of unrealized gain or loss is applied to "available-for-sale" securities.

Available -for-sale securities are those debt and equity investments that purchased with the intent of selling before maturity.