Long Term Non Trading Securities

1168 Words Feb 21st, 2016 5 Pages
Trading securities are securities that are held by an organization that intends to buy and sell for profit in the short-term (Balance Sheet, 2015). These securities are usually reported at their fair market value and any gains or losses are included in the income statement. They are also classified as either unrealized holding losses or gains on the statement of operations and this classification affects the operating income. The counter account on the balance sheet shows allowance for all adjusted short-term investments in the market (“Choosing the Appropriate Accounting”, n.d.).
Long term non-trading securities, on the other hand, are securities held by an organization that intends to buy and hold these securities until a fixed future maturity date. They are recorded at the original cost, which include any fees associated with the purchase, and losses or gains are only recognized after the business has sold the securities, additionally, they are not recorded on the income statement, and therefore, does not affect the operating income (Dong, Ryan, & Zhang, 2014).
Faust suggests that for those securities that have increased in value the organization should classify those securities as trading securities, which in turn would increase the net income for the reporting period. This is typically true since trading securities do effect the operating income of the organization, as they are reported on the income statement, and as such an increase in value would lead to an increase…

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