By this is meant an increase in the market price of real estate not sold but still owned by a concern. When considering this source of profit, the manager should clearly recognize the distinction between property owned and offered for sale by a real estate concern, and the real estate owned by a mercantile or manufacturing concern, consisting of warehouses or factories necessary for the conduct of business, but not, in the ordinary sense of the term, for sale.

It must not be forgotten that an enhanced valuation merely means that those making that valuation are of the opinion, or have the faith, that such values could be realized. There is yet to be found a better definition of faith than that which has been accepted for nearly two thousand years - "the substance of things hoped for, the evidence of things not seen." This indicates with singular accuracy the proper course to follow; the increase in values is something hoped for and believed in, but not realized. At the same time, it may be fair to show some evidence of this hope by a proper entry on the balance sheet.

The proper place for anticipated profits to appear is in a prospectus, a document whose very name indicates that it describes the good things which are expected to come. On the other hand, a balance sheet states conditions existing at a given moment which has already passed. While it may be a matter of regret that the statements of the balance sheet do not always fulfil the predictions of the prospectus, it is of importance to the stockholders that any such discrepancies in values be exhibited clearly, and if it is necessary to anticipate profits in order to hide such discrepancies, the investment is liable to prove a failure.