When a marketable security is sold the entry is

Cash

          Trading security(Cost)

          Realized gain on trading security(income statement)

My doubt here is-what happens to the Valuation a/c(Contra a/c) we create when an unrealized gain/loss is recognised. We don't seem to reverse it at the time of sale.

Isn't this same as the Accumulated Depreciation of fixed assets which is reversed at the time of sale.?

Please help me understand.

For trading securities, the realized gain or loss reported when the security is sold is the difference between the adjusted cost (original cost+/- unrealized gains/losses previously recognized on the income statement) and the selling price.

So, we are adjusting the valuation account (contra account) during calculation of the realized gain/loss !

Trading security - cost - means the adjusted cost !

Remember, we have already recognized the unrealized gain/loss on trading securities in the income statement...

Hope this helps !

True. It is the adjusted cost. But I just thought this would be more appropriate:

cash

valuation a/c

        Trading  investments(Cost)

         Realized gain

whereby Trading investment-valuation a/c is the adjusted cost . Thanks anyway!

valuation account is contra asset account ... on balance sheet, it's never shown separately ... The investment account is shown net of the valuation account..

Thus, the first journal entry you posted above would be a better approach.

I am asking this just for the purpose of better understanding. Is this not same as Accumulated Depreciation and Allowance for uncollectibles. To my knowledge these are also contra a/c, fixed asset is shown net of depreciation and so is Accounts receivable. But when there is a sale, we pass the entry

cash

Accumulated dep

          fixed asset

          gain on sale

Am I missing something?