When there is an unrealized loss on trading investments,the ________ will decrease.

Question

Quizplus · Accepted Answer

Unrealized losses on trading investments are recognized in the income statement as a reduction of net income which decreases total equity. This is because investments are classified as part of the assets and contribute to the total equity of a company since they have value that can be sold or used to generate earnings. Therefore, if there is a decline in the value of trading investments, it would lead to a decrease in the current value of the assets and subsequently decrease the total equity the business can retain.

When There Is an Unrealized Loss on Trading Investments,the ________