UK Accounting Glossary
A gain is an increase in the value of an investment or asset. A gain is typically expressed in monetary terms (e.g. a gain of $10 or a percentage gain). A gain is typically calculated by taking the current market value or sales price and subtracting the original purchase price (i.e. basis). The difference is the profit or gain for that transaction. In some cases, the original cost of the investment/asset may have increased (e.g. insurance reimbursements) or decreased (e.g. insurance costs, commissions, interest and maintenance) and the investor may have to adjust its purchase cost (i.e. adjusted basis) to calculate the taxable capital gain. A gain is one of the major objectives for investors along with income (e.g. interest, dividends). Gains are unrealized if the asset is retained and realized when the asset is sold. Unrealized gains are also referred to as paper gains, which might turn into losses if the asset’s value drops before its sale. Any gain realized upon the sale of an asset, known as a capital gain, is usually subject to taxation. The Internal Revenue Service taxes gains differently depending on the length of time the asset was held by the entity realizing the profit.
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This glossary post was last updated: 9th February 2020.