Sorry if this is a really stupid question. I'm 7 months pregnant and baby brain has well and truly set in!
I decided last year to put some of the cash from my business account into a trading account. I invested £10,000 and now have £12,000 as the share prices have increased. I haven't taken any money out of the trading account or received any dividends, it's just purely increased in value.
How do I treat this £2,000 increase in my accounts, as in what is the other side of the credit on the bank balance?
Thanks for any advice in advance, I really have no brain left!
Replies (6)
Please login or register to join the discussion.
Leaving aside the niceties of financial reporting, and compliance with accounting standards, which may or not be relevant to you depending on what type of entity it is which holds these investments, if you want to show the investments at current market value, your credit entry is "unrealised surplus on revaluation of quoted investments", or words to that effect.
The debit balance by the way is not a "bank balance", as you call it, but "quoted investments at valuation", or words to that effect.
The above is sensible advice if the option is still available to you. If the £10,000 originally belonged to a limited company, and was used to buy shares in the name of the limited company, the option to treat the payment for the purchase of shares as drawings is no longer available to you.
No the unrealised gain is not taxable unless and until the shares are sold at a profit.
Whether the credit goes the the P&L or to a revaluation reserve (and through the STRGL) is one of the niceties of financial reporting, which I said in my response I was leaving aside.
As accounting standards apply you need to take a further step back and decide what your company's accounting policy for these investments should be. Off the top of my head, you include them at cost, with market value at the balance sheet date disclosed by way of note. If that's right, you have no revaluation credit to put anywhere.