Gain Realization

Gain realization refers to the process of recognizing and recording the profits made from an investment or sale when the asset is sold or exchanged. It involves calculating any increase in value beyond the original purchase price. For instance, if you buy a stock for $50 and later sell it for $70, you realize a gain of $20. This concept is important in finance and accounting as it affects taxes and financial reporting, determining when and how profits are acknowledged, rather than simply reflecting changes in value while you still own the asset.