University of Central Florida (UCF) ACG3173 Accounting for Decision-Makers Exam 3 Practice

When recording marketable securities in the financial statements, the appropriate accounting entry involves recognizing the asset and the corresponding unrealized gain or loss at the time of initial recognition.

In this case, when marketable securities are recorded, the asset account "Mark. sec." is debited to reflect the increase in assets on the balance sheet. This action captures the cost or value of the securities being acquired. Concurrently, an unrealized gain or loss is credited because that represents the difference between the fair value of the securities and their cost, indicating a potential gain or loss that has not yet been realized through a transaction.

This entry is fundamental in ensuring that the accounting records uphold the principles of accurate asset valuation and disclose potential changes in value within the equity accounts. By crediting unrealized gain/loss, it appropriately shows how the market value of the securities may change over time, reflecting their impact on the financial statements without recognizing any transaction until a sale or realization occurs.

Therefore, this choice accurately describes the proper accounting treatment for newly acquired marketable securities in line with generally accepted accounting principles.