The Allowance to Adjust Long-Term Investments to Market and the Unrealized Loss on Long-Term Investments are reciprocal accounts,each with the same dollar balance.

Question

Quizplus · Accepted Answer

The Allowance to Adjust Long-Term Investments to Market and the Unrealized Loss on Long-Term Investments are both used to account for the decrease in value of long-term investments, but they have opposite effects on the financial statements. The Allowance increases the value of the investments on the balance sheet, while the Unrealized Loss decreases the value of the investments on the income statement. As a result, these accounts have equal but opposite balances.