Appropriate Accounting Method for Investment Securities

Assets

    Appropriate Accounting Method for Investment Securities

  • Trading Securities

          Trading securities include both debt and equity shares. It indents to sell and buy the shares in the short term profit. Trading securities are recorded in the investor’s balance sheet at the market value. This type of securities is trading always through the organized stock exchange. Trading securities are come under the category of the current asset. Profit and losses will be included in the income statement.

    Available for sale

        Available for Sale (AFS) is used to classify the assets. AFS securities are recorded in the balance sheet at fair value like trading securities. AFS securities and trading securities have similar characteristics. But the difference is in AFS securities the gain and losses will be recorded in the “unrealized gain/loss in other comprehensive income“account. The income statement will be unaffected. AFS securities are come under the category of Current asset.

    Held to maturity

    The company intends to buy and hold the securities until the date of maturity. These securities are recorded at cost price. Profits and Losses are only recognized after the company has sold the securities.

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