Unrealized Gain Definition - AccountingTools

AccountingTools

• CPE Courses Courses Grid Search for Courses Courses Sorted by Hours Latest Courses State CPE Requirements
• Articles Articles Topics Index Site Archive
• Books Accounting Books College Textbooks Finance Books Operations Books Science Fiction Novels
• Podcast Accounting Best Practices Podcast Index Podcast Summary
• Dictionary
• FAQs
• About About Contact Environmental Commitment
• Home

AccountingTools

• CPE Courses/
  • Courses Grid
  • Search for Courses
  • Courses Sorted by Hours
  • Latest Courses
  • State CPE Requirements
• Articles/
  • Articles
  • Topics Index
  • Site Archive
• Books/
  • Accounting Books
  • College Textbooks
  • Finance Books
  • Operations Books
  • Science Fiction Novels
• Podcast/
  • Accounting Best Practices
  • Podcast Index
  • Podcast Summary
• Dictionary/
• FAQs/
• About/
  • About
  • Contact
  • Environmental Commitment
• Home/

AccountingTools

Accounting CPE Courses & Books

Articles AccountingTools

• CPE Courses/
  • Courses Grid
  • Search for Courses
  • Courses Sorted by Hours
  • Latest Courses
  • State CPE Requirements
• Articles/
  • Articles
  • Topics Index
  • Site Archive
• Books/
  • Accounting Books
  • College Textbooks
  • Finance Books
  • Operations Books
  • Science Fiction Novels
• Podcast/
  • Accounting Best Practices
  • Podcast Index
  • Podcast Summary
• Dictionary/
• FAQs/
• About/
  • About
  • Contact
  • Environmental Commitment
• Home/

What is an Unrealized Gain?

An unrealized gain is an increase in the value of an asset that has not been sold. It is, in essence, a "paper profit." When an asset is sold, it becomes a realized gain. The presence of an unrealized gain may reflect a decision to hold an asset in expectation of further gains, rather than converting it to cash now. The holding decision may also involve an expectation that a longer holding period will result in a lower tax rate, as is the case with the longer holding period required for the capital gains tax.

Investors typically value their current holdings as their original investment, plus unrealized gains, minus unrealized losses.

Example of an Unrealized Gain

For example, ABC Company owns an investment that cost $100,000, but which now has a market value of $120,000. ABC therefore has an unrealized gain of $20,000. Later, ABC needs cash and therefore elects to sell the investment for $120,000. ABC now has a realized gain of $20,000, on which it must now pay taxes.

Accounting for an Unrealized Gain

A common example of an unrealized gain is an increase in the price of shares designated as available-for-sale by the holder of the shares. The accounting for this type of unrealized gain is to debit the asset account Available-for-Sale Securities and credit the Accumulated Other Comprehensive Income account in the general ledger. A sample entry appears next.

Terms Similar to Unrealized Gain

An unrealized gain is also known as a paper gain or paper profit, since the gain or loss has not yet been translated into money.

FAQs

What types of assets commonly generate unrealized gains?

Assets that commonly generate unrealized gains include marketable equity and debt securities measured at fair value, investment real estate subject to revaluation, and derivative financial instruments. Foreign currency–denominated assets may also produce unrealized gains due to exchange rate movements. These gains arise from changes in market prices, interest rates, or valuation assumptions rather than completed transactions.

Related Articles

Unrealized Holding Gain

Unrealized Holding Loss

• Average total cost definition
• When to put parentheses around a ...

• CPE Courses/
  • Courses Grid
  • Search for Courses
  • Courses Sorted by Hours
  • Latest Courses
  • State CPE Requirements
• Articles/
  • Articles
  • Topics Index
  • Site Archive
• Books/
  • Accounting Books
  • College Textbooks
  • Finance Books
  • Operations Books
  • Science Fiction Novels
• Podcast/
  • Accounting Best Practices
  • Podcast Index
  • Podcast Summary
• Dictionary/
• FAQs/
• About/
  • About
  • Contact
  • Environmental Commitment
• Home/

AccountingTools

Go to CPE Courses Go To Course Bundles

Accounting Books

College Textbooks

Finance Books

Operations Books

Copyright 2026