Why realised loss matters to a first-time founder
Disposing of an asset below its basis can reduce reported profit and may affect tax, but the cash received still supports liquidity. Knowing the correct basis and transaction costs prevents founders from confusing cash proceeds with the economic result.
Examples of realised loss
A company sells equipment for $9,000 when its accounting carrying amount is $12,000 and pays $400 in selling costs. The accounting loss is $3,400, subject to the applicable rules. Its tax loss may differ because tax depreciation follows another basis.
Common misunderstanding
A fall in market value is not necessarily a realised loss. Before disposal it may be an unrealised loss or impairment, depending on the asset and reporting framework. A sale below the original price can still produce an accounting gain if carrying value is lower.
When to use it
Use it when recording disposals, explaining investment performance or assessing tax outcomes. Keep acquisition, depreciation, improvement and sale records. Distinguish book basis from tax basis, and confirm local rules on recognition, loss relief and transactions with connected parties.
US spelling: realized loss.