Final answer:
Debit the fair value account in trading securities when the fair value is greater than the original cost and credit the fair value account when the fair value is less than the original cost.
Step-by-step explanation:
When fair value is greater than the original cost of a trading security, you would debit your fair value account. This means you would increase the fair value of the security on your books. By doing this, you recognize that the value of the security has increased and you have a potential gain.
On the other hand, when fair value is less than the original cost of a trading security, you would credit your fair value account. This means you would decrease the fair value of the security on your books. By doing this, you recognize that the value of the security has decreased and you have a potential loss.