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Marketable Securities: Available-for-Sale

Last updated 23rd Sep 2022


The term marketable securities, available-for-sale is used to describe investments in debt and equity securities that a company does not intend to trade for profit or hold until maturity. In practice, marketable securities that are "available-for-sale" are those that are not classified as either "trading" or "held-to-maturity." Marketable securities are a subset of short-term investments; as such, they appear on the company's balance sheet and are classified as a current asset.


Marketable securities are temporary investments one company might make in another, with the hope of providing higher returns to its shareholders. There are two basic types of these securities:

  • Marketable Equity Securities: common or preferred stock investments held by a company in another large corporation.
  • Marketable Debt Securities: short term bonds held by one company in another large corporation.

The accounting treatment of marketable securities depends on whether or not the company acquiring these investments intends to hold them until they mature, trade them, or make them available for sale.

GAAP requires adjustments to the balance sheet as the fair market value of securities categorized as "available-for-sale" change over time. It's important to note this change in value does not require an income statement adjustment. If the market price of a marketable security increases, the change in value is recorded as an unrealized gain, while a decrease in the fair market price is classified as an unrealized loss.


On January 3rd, Company A purchased shares of common stock in Company XYZ for $100,000. This common stock is being held by Company A for investment purposes, as an alternative to placing cash in a bank account. The Company has classified these marketable securities as available-for-sale. The journal entry to record the purchase of these securities is as follows:

DebitCreditMarketable Securities: Available-for-Sale$100,000 Cash $100,000

At yearend, the market value of this stock increased to $112,000. The journal entry to record this change in market value would be as follows:

DebitCreditMarketable Securities: Available-for-Sale$12,000 Unrealized Gain on Marketable Securities: Available-for-Sale $12,000

Note: Unrealized Gain on Marketable Securities: Available-for-Sale is a balance sheet item.

In March, Company A decided to sell their shares of Company XYZ for $105,000. The journal entry to record this transaction would be:

DebitCreditCash$105,000 Unrealized Gain on Marketable Securities: Available-for-Sale$12,000 Marketable Securities: Available-for-Sale $112,000Gain on Sale of Marketable Securities: Available-for-Sale $5,000

Related Terms

marketable securities, marketable securities: held-to-maturity, marketable securities: trading, ownership interest, equity method, cost method

Moneyzine Editor

Moneyzine Editor