Need better documentation on using Lots [Was: Chapter 8 - investment accounts]
Philip Walden
pcwalden at comcast.net
Wed Sep 9 14:19:08 EDT 2015
David Carlson wrote:
> Philip,
>
> When I asked "Does it zero out the value of the security asset account
> that held the
> security before it was sold" I was not referring to any transaction or
> record, whatever that might be. I meant to ask "does the sum of all
> currency into and out of the now empty security account equal zero?"
> You can answer that question by running a balance report on that
> account alone and see if both the number of shares is zero and the
> unrealized gain shown at the end of the report is also zero.
I am not much of a gnc aficionado and my grasp of nomenclature is
somewhat weak.
I am having trouble finding a "Balance Report" for the "stock" account.
I see a global "Reports>Assets > Balance Sheet" report, but no Balance
Report" for a specific account. I see only a "Reports > Account" report.
If you can point me to the right report, I can build a dummy account and
test it. My working account has a non-zero number of stocks.
>
> The Show Lots dialog should be generating a transaction or series of
> transactions that drives the unrealized gain to zero. Those
> transaction(s) should (I presume) be the ones that are also generating
> the orphaned gains that need to be re-assigned to the correct Capital
> Gains(Income) account(s) to be linked to the proper brokerage account
> at tax time.
It is generating orphaned gains and I am re-assigning them to short or
long term gains.
>
> Then my next question was whether Show Lots dialog includes the
> brokerage charges in those orphaned gains. If it does, it must be
> separately transferring those expenses from some other account to the
> orphaned gains account, because they cannot come out of the security
> asset account unless the user has chosen to bury commissions
> altogether, and only use net amounts. In either case, we should know
> how it works to be sure that our results are correct.
As far as I can tell, it does not include brokerage charges in the
orphaned gains. I have been adding them in the stock sale split and the
generated orphaned gain appears to take the brokerage charges in the
sale split into account.
>
> Using only net (including commissions) amounts works, if it is done
> consistently, but the trade-off is that GnuCash does not show the
> actual trade price in the buy and sell transactions. Other threads in
> this list and the Dev list have made it abundantly clear that many
> users want the price to be shown accurately, even if it does not work
> out exactly due to rounding errors.
Yes, I have been doing it this way as my brokerage does not report
commissions very clearly. Yes, it does affect the stock price history,
but their commission fees are low and I am not that fussy. I guess you
cannot have it both ways.
>
> By the way, using only net amounts makes for simpler (less detailed)
> transactions in GnuCash and gets you closer to seeing numbers that
> match what your broker will report in the 1099 to the IRS.
Exactly.
>
> Which method works better for you?
Skipping commissions and using net works for me most of the time. Last
year I had the situation of recording a large stock option
exercise-with-immediate-sell. The commission was significant enough that
I could not ignore it.
>
> David C
>
> On Tue, Sep 8, 2015 at 6:07 PM, Philip Walden <pcwalden at comcast.net
> <mailto:pcwalden at comcast.net>> wrote:
>
> David Carlson wrote:
>
> On 9/8/2015 1:08 AM, Philip Walden wrote:
>
> John Ralls wrote:
>
> On Sep 7, 2015, at 5:08 PM, Philip Walden
> <pcwalden at comcast.net
> <mailto:pcwalden at comcast.net>> wrote:
>
> John Ralls wrote:
>
> On Sep 7, 2015, at 9:52 AM, Philip Walden
> <pcwalden at comcast.net
> <mailto:pcwalden at comcast.net>>
> wrote:
>
> John Ralls wrote:
>
> On Sep 6, 2015, at 3:04 PM, Philip
> Walden <pcwalden at comcast.net
> <mailto:pcwalden at comcast.net>>
> wrote:
>
>
> WRT the "Concepts of Lots", per
> the discussion below I want to
> use lots in my stock accounts, but
> the document "Lots
> Architecture & Implementation
> Overview" only talks about the
> concept and does not give many
> clues as to how one should use
> the View Lots... screen.
>
> For example, what does Scrub
> Account do? What does Scrub (a
> record) do? What does the Splits
> Free and Splits in Lots mean or
> do.
>
> I have experimented several times
> only to get confused as to
> what is happening and end up
> backing out the work for fear of
> going down a rat-hole and ruining
> my stock gain/loss reporting
> integrity.
>
> I sort of understand the concept,
> but how is it implemented in
> the View Lots... screen? I cannot
> find anything helpful in the
> tutorial.
>
> My particular circumstance is that
> I have many old stock
> holdings in several accounts with
> lot tracking done on paper.
> I'd like to get them into gnc if I
> can. So the "automatic"
> scrubbing and lot set up does not
> seem to work for me as I
> already have prior lot database
> I'd like to enter; and then it
> could be that I just do not
> understand the View Lots... screen
> and its nomenclature.
>
> Thanks in advance for any help or
> pointers
>
> AS you probably know there are a
> variety of strategies for
> grouping lots and for deciding which
> lot is the one you sold.
> GnuCash supports exactly one: A lot
> consists of a single buy
> transaction and sales are first-in,
> first-out. If that’s not what
> you want, you have to handle all of it
> manually and ignore the
> View Lots dialog.
>
> Regards,
> John Ralls
>
> Hi John
>
> Thanks for your swift reply. I think FIFO
> will work for me, but I
> am having trouble translating the
> "Concepts of Lots", the only
> documentation that I can locate, to the
> "View Lots..." screen
> functionality. For example, the screen
> menu button "Scrub" and
> what it does is not documented as far as I
> can determine.
>
> I was hoping for some kind of
> tutorial/pointers about how the
> screen functions translate to the
> "Concepts of Lots". Maybe there
> isn't any?
>
> Also, you mention a "manual" method not
> using the "View Lots..."
> screen. I cannot seem to find any other
> method, manual or
> otherwise, for "Lots" anywhere in gnc.
>
> _
>
> Philip,
>
> The original subject of the thread you
> hijacked was “Chapter 8 -
> Investment accounts”. Have you studied that
> chapter?
>
> Chapter 8 of the guide is really titled
> “Investments”, and the
> English version can be read online at
> http://www.gnucash.org/docs/v2.6/C/gnucash-guide/chapter_invest.html.
>
> Regards,
> John Ralls
>
> Hi John
>
> Yes I have studied Chapter 8 intently,
> particularly the 8.7 Selling
> Stock section. There is no mention of the "View
> Lots..." screen
> anywhere in that chapter.
>
> The 8.7 section discusses manually creating a
> stock sell splits, but
> There is no mention of how to specify a lot
> associating the sale
> with a buy.
>
> So I am assuming there is no documentation
> documenting how to use
> the "View Lots..." screen.
>
> After some painful experimentation I have come up
> with a somewhat
> poor recipe to record lots and capture capital
> gains. The
> pain/poorness comes from trying to translate the
> "proceeds", "cost
> basis" and "gain/loss" from my broker account
> reports into the "sell
> price" and "commission" in gnc, such that the
> capital gains gets
> recorded correctly. However, I do not feel that is
> a gnc problem.
>
> I'd like to thank "Mike" in a previous post for
> the clues to figure
> it out.
>
> Here is the recipe I am going to use going ahead.
>
> 1. record buy of stocks with care to get accurate
> cost of shares.
> 2. Actions > View Lots...: Select the added stock
> purchase record,
> press create lot.
> 3. record sell of same stocks. Do not follow
> Chapter 8.7 as it
> includes the gain/loss in the split. The split
> should only have the
> proceeds to the asset account, the commission, and the
> shares-price-sale.
> 4. Actions > View Lots...: Select the lot with the
> stocks just sold.
> The "Splits in Lot should show the selected
> purchase. The Splits
> Free should show the sale just created.
> 5. Select the sale in the Splits Free window.
> 6. Press the >> button to associate the Sale with
> the Buy.
> 7. Close the View Lots window.
> 8. An Orphaned Gain record should have bee
> automatically created
> with, hopefully, the correct gain or loss amount.
> Edit the record to
> direct the gain/loss to the appropriate short or
> long capital gain
> account.
>
> Philip,
>
> I meant to study Chapter 8 to understand how to do it
> manually. There
> is no documentation on the View Lots dialog box.
> What’s more, I’ve
> tried it a few times and found that it works well in
> simple cases and
> less well when there are overlapping buys and sells —
> but I’ve only
> tried it using the “Scrub Lots” button which does your
> steps 5 & 6
> automatically. Since you seem to have worked out a
> semi-automatic
> approach I suggest that you create a fake book and
> test it out in the
> scenarios you expect. If it works consistently for
> you, great!
>
> Chapter 8.7 doesn’t include the gain in the split, it
> creates a new
> split pair in the transaction. If you prefer a
> separate transaction
> that’s OK, just create the splits as 8.7 explains in a new
> transaction instead of in the sell one.
>
> Regards,
> John Ralls
>
> Thanks John,
>
> Looks like I can do what I need by avoiding the "Scrub" button
> automation and just use the ">>" and "<<"" buttons to
> select sale
> transactions to a specific Lot-Buy. One buy per lot.
>
> When I use the above method, a separate Gain is recorded
> automatically. That is why I do not add one to the split
> within the sale.
>
> Again, thanks for your patience.
>
>
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>
> Philip,
>
> It is interesting that you have 'discovered' a part of the
> Show Lots
> feature that had been lost due to lack of documentation. I am
> curious
> now how far that feature goes.
>
> Does it zero out the value of the security asset account that
> held the
> security before it was sold
>
> It does not zero out any record. Each buy and sell remains a
> separate record (split). You have to use the View Lots... screen
> to see the remaining number of shares in each lot.
>
> and generate an offsetting income or loss
> value?
>
> When you select a sell with a lot containing a buy, it
> automatically generates a separate Capital Gain/Loss split. The
> gain appears to be calculated by the subtracting the cost per
> share in the buy record, times the number of shares sold, from
> the sell price.
>
> Does it also identify both the opening and closing commissions
> and include them in the calculation?
>
> No. However, I include the commission in the sell record (split).
> If you suffer from buy commissions, I would include them in the
> buy record (split). You may find recording commission easier using
> a different method.
>
> If so, where does the offset go
> for those commissions? Would that go to a different
> income/expense
> account or to an adjustment to retained earnings?
>
> See previous comment
>
> Does it work if the
> original lot was partly sold on one date then the rest sold on
> another
> date?.
>
> Yes, you can select multiple sell records on different dates. I
> assume you cannot add anymore once the lot quantity is exhausted.
> I have not tested that. It would be an error case regardless.
>
> Does it work if multiple lots are sold at the same time?
>
> Yes, just record every sale, then individually select each record
> from the Free Splits window on the View Lots... screen. Avoid the
> Scrub mechanism(s) if you want to control the process as it will
> always just chose the first available lot.
>
>
> If it does some but not all those things, that should be
> documented too
> and possibly used as a basis for a request to improve the
> functionality
> of that feature.
>
> I agree that I am able to use the Lot functionality and that
> incorporating a description in the documentation would be of
> benefit and would have saved me a few days trying to figure it out.
>
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