Why do we Exclude Unrealized gains. Such as the increased value in your home before it sold?

Unrealized gains, like the increased value of a home before it is sold, are excluded from financial statements because they represent potential value rather than actual cash or tangible assets. These gains are not liquid and cannot be accessed until the asset is sold, making them uncertain and speculative. Including unrealized gains could distort a company's or individual's financial position, leading to misleading assessments of wealth or profitability. Thus, only realized gains, which have been converted into cash or equivalents, are typically recognized in financial reporting.