Journal Entries for Other Comprehensive Income
Other Comprehensive Income (OCI) includes revenues, expenses, gains, and losses that are excluded from net income on the income statement. Instead, these items are reported under equity in the balance sheet, under "Accumulated Other Comprehensive Income." Typical items in OCI include unrealized gains and losses on certain types of investments, foreign currency translation adjustments, and pension plan adjustments.
Here are some examples of journal entries for various items that fall under Other Comprehensive Income:
1. Unrealized Gain on Available-for-Sale Securities
When a company holds available-for-sale securities and their market value increases, the unrealized gain is recorded in OCI.
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| 2024-06-07 | Available-for-Sale Securities A/c | 50,000 | |
| To Unrealized Gain on Securities A/c | 50,000 | ||
| (Being unrealized gain on available-for-sale securities recorded) |
2. Unrealized Loss on Available-for-Sale Securities
When the market value of available-for-sale securities decreases, the unrealized loss is recorded in OCI.
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| 2024-06-10 | Unrealized Loss on Securities A/c | 30,000 | |
| To Available-for-Sale Securities A/c | 30,000 | ||
| (Being unrealized loss on available-for-sale securities recorded) |
3. Foreign Currency Translation Adjustments
When a company translates the financial statements of its foreign subsidiaries from the local currency to the reporting currency, adjustments are made in OCI.
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| 2024-06-15 | Foreign Currency Translation Adjustment A/c | 25,000 | |
| To Accumulated OCI (Foreign Currency) A/c | 25,000 | ||
| (Being foreign currency translation adjustment recorded) |
4. Pension Plan Adjustment
Adjustments for changes in the funded status of defined benefit pension plans are recorded in OCI.
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| 2024-06-20 | Accumulated OCI (Pension Plan) A/c | 15,000 | |
| To Pension Liability A/c | 15,000 | ||
| (Being adjustment for changes in the funded status of pension plan) |
These entries ensure that items impacting a company's comprehensive income are accurately reflected in the financial statements, providing a clear picture of the company's financial health and performance beyond net income. Properly recording OCI items is essential for compliance with accounting standards and for providing stakeholders with a complete understanding of the company's financial position.
