Trading security
Financial Accounting glossary · Financial Accounting
Definition
Debt or equity classification carried at fair value through net income; gains/losses recognized in P&L each period.
Trading security in plain English
When a company buys stocks or bonds it plans to flip quickly for a profit, those are trading securities. Because it's actively trying to sell them soon, accounting makes it report them at today's market price (fair value) every period, and any rise or fall in that price hits its profit right away — even if it hasn't sold yet. Imagine reselling sneakers: if a pair you bought jumps in resale value this month, you'd count that gain now because you're about to sell anyway. The 'P&L' (profit and loss) just means the company's income scorecard for the period.
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