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Fincash » Realized Loss

Realized Loss

Updated on September 25, 2020 , 214 views

What is Realized Loss?

A realized loss is the loss that is recognized when assets are sold for a price lower than the original purchase price. It is a loss that occurs when the sale price of an asset is lower than its carrying amount. A realized loss is a decrease in the value of an asset that has been sold. The investor can only make claim to a profit or loss after he has sold the security at fair market value in an arm’s length transaction.

Realized-loss

Although the asset may have been held on the Balance Sheet at a fair value level below cost, the loss only becomes realized once the asset is off the books. An asset is removed from the books when it is sold, scrapped, or donated by the company.

Realized Value Illustration

For illustration purpose, let's assume you own 100 shares of Company ABC that you purchased for INR 1,000. If the value of the investment decreases to INR 200 and you sell the shares, your realized loss equals INR 800.

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