Recognised versus realised profits

What is the difference between recognised and realised profits

Recognised profits are those that result from the sale or revaluation by considering the differences between the basis of the asset and the sale price.

For example, when an asset is revalued, its initial value is the basis of the asset and the current value is the sell price. The gain from that difference is the recognised profit (Duhovnik, 2008).

On the other hand, realized profit is the actual amount of money earned from the sale of an asset. If the land is sold at the selling price, then the resulting profit is realised profit.

Realised profits determine the amount of tax to be paid while recognised gains only create a tax liability.

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