Inventory and payroll

[Christopher Browne]

On Tue, 12 Sep 2000 12:13:46 +1000, the world broke into rejoicing as
"Phillip Shelton" <shelton@usq.edu.au>  said:
> Umm, you lost me here. Selling shares `costs'? Don't I sell the shares for
> the going rate of $5.02 and thus make about a dollar on each share minus the
> commission and any rounding errors? ie I debit(?) the brocker account and
> credit my equity? while at the same time noting that I now have less
> shares????

There's a certain amount of "point of view" here...

Precisely where the cost lies is somewhat in the eye of the beholder.

One of the ways of looking at things is that the sale results in the
following...

-> Sale of stock, 100 shares at $5.02 --> $502
-> Costs: The original price paid for the stock, $402, plus the $25 of
   commissions that the broker charged.

Selling the shares "cost" you $25 in that you had to pay the broker $25
for the transaction.

For those of us with relatively simple portfolios, particularly those
sitting inside tax shelters like 401(k) or RRSPs, it is probably quite
OK to _essentially_ account for them on a cash basis.  Any money that
comes in represents an income; any money that goes out represents a
"cost."

In more complex situations, it may prove necessary to track the individual
components.  The commission costs associated with purchasing stock may
need to be kept distinct from commissions associated with sales of stock.
And so forth for other sorts of transactions.

> John Hasler writes:
>  > Phillip Shelton writes:
>  > > Ok, do you mind trying to tell me what is a better, more correct thing
>  > > gnucash should be doing?
>  >
>  > The cost of a securities purchase is the amount of money you paid your
>  > broker.  This not generally equal to price times number of shares: it
>  > includes commissions, rounding "errors", etc.
>  >
> 
> Correct, as I understand things.  Additionally, when you sell shares,
> for calculating the "cost" of the sold shares, you need to know
> exactly what shares you have sold (did you sell the ones you bought in
> January at $3.95, or the ones you bought in February at $4.88).
> GnuCash is not yet set up to record this kind of thing.  The new file
> format will provide the infrastructure to do so.
--
cbbrowne@acm.org - <http://www.hex.net/~cbbrowne/lsf.html>
Expect the unexpected.
-- The Hitchhiker's Guide to the Galaxy, page 7023