Stock price changes and asset-equity balance

[Phil Longstaff]

Not quite.  When you manually update the stock price, the number of shares (which is the value maintained in that asset account) is unchanged.  All that changes is the market value, which is shown on the accounts page, which is #shares times most recent price.  You are correct that on the accounts page, there is no corresponding change to the equities due to unrealized gains.

If you run a balance sheet report, the accounts section will show the same values as on the accounts page, and there will be an unrealized gains line under equities.

Phil




________________________________
From: Clayton Macdonald <cm1950 at fastmail.fm>
To: Maf. King <maf at chilwell.net>
Cc: gnucash-user at gnucash.org
Sent: Tue, January 5, 2010 1:01:59 PM
Subject: Re: Stock price changes and asset-equity balance

This is the way I see it: Equity is what is owed the owner, i.e., it is 
a liability, just like any other. Assets, on the other hand, are what's 
available for use. N.B. the basic accounting equation: Assets - 
Liabilities = Equity + (Income - Expenses). Alternatively: Assets + 
Expenses = Equity + Liabilities + Income

This is my problem: when I manually update stock prices, the value of 
the asset side of the above equation changes in my GnuCash file. GnuCash 
does not seem able to make any balancing change on the liabilities side 
of the equation.

Maf. King - many thanks! - has been trying to help me see where I'm 
messing up, but I still don't get what I can do except track investments 
in an entirely separate set of accounts and manually transfer changes. 
Is that the only solution? Any advice?


On 10/01/05 12:03, Maf. King wrote:
> On Monday 04 January 2010 23:42:24 you wrote:
>    
>> On 10/01/04 00:48, Maf. King wrote:
>>      
>>> On Sunday 03 January 2010 15:46:39 Clayton Macdonald wrote:
>>>        
>>>> I'm a new user who successfully set up an initial group of accounts such
>>>> that assets etc. and equity etc. balanced. Assets consist of stocks;
>>>> equity consists of opening balances. Looked good. Eventually, I updated
>>>> the current prices of my various stocks and mutual funds using the price
>>>> editor. The result was a significant imbalance between assets and
>>>> equity, i.e., a price update affects the value of assets but does not
>>>> seem to affect the value of equity. I am sure there is something very
>>>> obvious that I am missing - or something very stupid that I have done.
>>>> Any suggestions?
>>>>          
>>> Hi,
>>>
>>> Would this be a case of "unrealised gains"? - Until you actually sell the
>>> stocks, they only have a theoretical value.
>>>
>>> Welcome to the list and GC, by the way.
>>>
>>> Maf.
>>>        
>> Thanks for the quick reply!
>>
>> Yes, of course the gains - lately, too often losses - are unrealized in
>> terms of cash until the assets (stocks) are sold. Nevertheless, if I
>> manually update the price of a stock using the price editor, Gnu Cash
>> seems to treat that as a real change in the value of my assets, even if
>> unrealized, e.g., if the price of my one share of XYZ Co. goes from $10
>> to $5, the total value of my assets drops $5.  But the value of my
>> equity does not change. (N.B.: /Assets - Liabilities = Equity + (Income
>> - Expenses)...or?) /It seems to me that if my assets are considered to
>> have changed in value, then my equity should show a commensurate change
>> in value.
>>
>> In other words, the price editor seems only to affect one side of the
>> balance sheet - it changes assets, but does not make any balancing entry
>> in equity or other liabilities.
>>
>> What's the solution? Thanks!
>>      
>
>
> By "equity" do you mean the "equity branch" of the accounts tree, or a figure
> in a report somewhere?
>
> If it is the former, then that won't change - it is a kind of "placeholder"
> equity for things like opening balances (or year-end closing zeroing
> transactions, or shareholder capital etc.) rather than a real-time total of
> the accounting equation.
>
> HTH,
> Maf.
>    

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