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Realised and unrealised gains

Y

yeah_baby

Member
I think I'm confusing myself on this...

What is a realised gain and what is an unrealised gain? What would be an example of each?

(I know this is something I really ought to know... but with CA1 it seems there's so many things I'd like to be more sure about but no time to go and double-check everything!)

Thanks in advance :)
 
Some1 please correct me if im wrong....

Say you buy a share for $1. Then the next day its market price goes up to $2. THen in theory you have made a capital gain, however, this is unrealised since you haven't actually received this extra money in any form.
If you sold the share for $2 then you have crystallised the asset and actually made a capital gain of $1, this is a realised capital gain. If you are subject to capital gains tax then you will be taxed on this $1 profit.

Realised/Unreadlised capital gains are discussed in the accounting part of CA1. I think what it is getting at is that in both circumstances the overall balance sheet position will be the same. (i.e. assets increase by $1). However, the gain has been secured and taxed if it is realised.
 
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