Realized Gain
A realized gain results from selling an asset at a price higher than the original purchase price. It occurs when an asset is sold at a level that exceeds its book value cost.While an asset may be carried on a balance sheet at a level far above cost, any gains while the asset is still being held are considered unrealized as the asset is only being valued at fair market value. If selling an asset results in a loss, there is a realized loss instead.A realized gain can be compared with an unrealized gain.
Definition: Realized gains refer to the profits generated from selling an asset at a price higher than its original purchase price. This occurs when an asset is sold at a level exceeding its book value cost. Although the value of the asset on the balance sheet may be much higher than the cost, any gains while still holding the asset are considered unrealized gains, as the asset is only valued at fair market value. If the sale of the asset results in a loss, it is a realized loss. Realized gains can be compared to unrealized gains.
Origin: The concept of realized gains originates from accounting and finance, aiming to distinguish between the book value appreciation of an asset during its holding period and the actual profit upon sale. With the development of financial markets, this concept has been widely applied in investments and financial statements.
Categories and Characteristics: Realized gains are mainly divided into two categories: capital gains and income gains. Capital gains refer to profits obtained from selling assets (such as stocks, real estate), while income gains are profits earned during the holding period of assets (such as dividends, interest). Characteristics of realized gains include: 1. Requires actual transaction; 2. Reflects true financial status; 3. Affects tax reporting.
Specific Cases: Case 1: Xiao Ming bought a stock for 100 yuan in 2020 and sold it for 150 yuan in 2023, realizing a gain of 50 yuan. Case 2: Xiao Hong bought a property for 2 million yuan in 2019 and sold it for 2.5 million yuan in 2024, realizing a gain of 500,000 yuan.
Common Questions: 1. What is the difference between realized gains and unrealized gains? Realized gains are obtained through actual transactions, while unrealized gains are book value appreciations. 2. Are realized gains taxable? Yes, realized gains are usually subject to capital gains tax.
