Trading securities definition
/What are Trading Securities?
Trading securities is a category of securities that includes both debt securities and equity securities, and which an entity intends to sell in the short term for a profit that it expects to generate from increases in the price of the securities. This is the most common classification used for investments in securities.
Trading is usually done through an organized stock exchange, which acts as the intermediary between a buyer and seller, though it is also possible to directly engage in purchase and sale transactions with counterparties.
Accounting for Trading Securities
Trading securities are recorded in the balance sheet of the investor at their fair value as of the balance sheet date.
Presentation of Trading Securities
Trading securities are always reported in the balance sheet as a current asset. This is because they are classified as being potentially sellable at any time, and so cannot be classified as long-term assets.
If there is a change in the fair value of a trading security from period to period, this change is recognized in the income statement as a gain or loss.
Other Types of Securities
Other types of marketable securities are classified as available-for-sale and held-to-maturity.