How to Record a Realized Gain When Endowment Stocks Are Sold Above Cost
Recognizing a capital gain on the sale of endowment portfolio securities sold above their original cost.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Cash in Bank (Endowment) | Asset (+) | 120,000.00 | - |
| Investments (Endowment — at Cost) | Asset (-) | - | 100,000.00 |
| Realized Gain (With Restrictions) | Revenue (+) | - | 20,000.00 |
💡 Accountant's Note
Realized gains on endowment investments remain restricted within the endowment unless the board appropriates them for spending per the spending policy.
Practitioner & Systems Framework
💻 ERP Architecture
The realized gain is the difference between sale proceeds and the cost basis of the specific lot sold. Classify as With Restrictions (permanently or temporarily depending on donor agreement and jurisdiction). Under UPMIFA, realized gains on true endowments are generally treated as part of the endowment fund — not available for operations until appropriated. Update the investment register to remove the sold securities.
⚠️ Audit Flags
Auditors verify the cost basis calculation and confirm the gain is correctly classified. They also check whether the sale was authorized by the investment committee and consistent with the IPS. Unreported realized gains (netting against losses to show only the net) are not permitted — gross gains and losses must be disclosed separately.
📄 Required Documentation
Investment committee sale authorization, trade confirmation (securities sold, proceeds, date), cost basis lot record, realized gain calculation, investment register update, and net asset classification (restricted).
Automate this entry with the JEH Accounting Suite
Stop doing manual entry. Our VBA-powered ERP automatically generates your ledgers, Trial Balance, and Financial Statements.
No Subscriptions. Own your data.
Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.