Realized gains refer to profits from completed transactions whereas unrealized gains refer to profits that have materialized, but the transactions have not been completed.
Realized gains are the profits earned from already completed transactions, thus they involve a receipt of cash. These are recorded in the income statement.
Unrealized gains refer to profits that have occurred on paper, but the respective transactions have not yet been completed. An unrealized gain is also called a paper profit because it is recorded on paper but has not actually been realized. Therefore, there is no cash receipt involved in unrealized gains. Unrealized gains are recorded in an account called accumulated other comprehensive income, which is found in the owners’ equity section of the balance sheet.
