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Unrealized loss and gains

prashant (enginnering) (51 Points)

03 May 2009

Hi everyone

i wanted to know about the concept related to unrealized loss and gains..what is the accounting entry generated for this?

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4 Replies

CA P KARTHIKA (Chartered Accountant) (715 Points)
Replied 04 May 2009

Hi Prashant,

Mostly unrealised profits are deducted from the Profit & Loss a/c and balance profits made to reflect...Usually in if goods are invoiced more than the markup cost or with a profit on cost between holding and subsidiary companies, in such circumstances stock reserve a/c is created and from the P&L a/c of the profit making company such share of profit over cost of the selling company is deducted and balance shown in Balance Sheet... In branch and Departmental a/cs stock reserve entries are passed. In consolidation of financial statements no such entries are passed... Hope u could understand....

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PiyushAgrawal (Chartered acooutant in practice) (575 Points)
Replied 04 May 2009

Originally posted by :KARTHIKA
"	Hi Prashant, Mostly unrealised profits are deducted from the Profit & Loss a/c and balance profits made to reflect...Usually in if goods are invoiced more than the markup cost or with a profit on cost between holding and subsidiary companies, in such circumstances stock reserve a/c is created and from the P&L a/c of the profit making company such share of profit over cost of the selling company is deducted and balance shown in Balance Sheet... In branch and Departmental a/cs stock reserve entries are passed. In consolidation of financial statements no such entries are passed... Hope u could understand....	"

The Entry will be:-

Profit & loss A/c Dr

To Unrealised reserve a/c

The balance of unrealise reserve is shown in balance sheet sunstracting relative item.

prashant (enginnering) (51 Points)
Replied 04 May 2009

In Liability side under which head it will be shown?

CA SUDIPTA SINHA (Commerce Coaching- Accounts Cost FM) (735 Points)
Replied 05 May 2009

unrealised gain is a gain against which no consideration will be realised. e.g. A Co. is the Holding Co. of B Co. A Co. sold goods to B Co. for Rs. 100000 at a 25% profit on cost. the goods remained unsold at the date of the balance sheet. now at the time of preparing consolidated financial statement the stock of B Co. will be merged with that of A Co. But that stock will include the profit made by A Ltd. that profit can not be realised bcause in the CFS that stock belongs to A Co. hence the portion of the unrealised gain shall have to be eliminated by passing the following entry:

P/L a/c .....Dr. Rs. 20000 (Rs. 100000/5)

To, Stock a/c Rs. 20000