What are the effects on the accounting equation from the recognition of an unrealized loss on trading securities?

Question

Quizplus · Accepted Answer

Recognition of an unrealized loss on trading securities decreases the value of the assets (trading securities) and decreases the shareholders' equity (retained earnings). Therefore, option A is the correct answer. Option B is incorrect because unrealized gains and losses should be recorded for trading securities. Option C is also incorrect because there is no explanation of how liabilities decrease with the recognition of an unrealized loss on trading securities. Option D is also not correct as there is no explanation of how liabilities increase with the recognition of an unrealized loss on trading securities.

What Are the Effects on the Accounting Equation from the Recognition