accounting for stock trades

[David Hampton]

On Thu, 2003-01-02 at 11:30, Derek Atkins wrote:
> Ed Warnicke <hagbard@physics.rutgers.edu> writes:
> 
> > Please excuse my extreme ignorance :) But how do LOTs allow for a
> > balancing split for
> > the loss?
> 
> They don't, and they don't need to.
> 
> The loss is the difference between purchase price and sale price.
> There is no "balancing split".  Each transaction is balanced on each
> individual purchase/sale.  The lot balances when you sell all the
> shares out of the lot.
> 
> The balance of the lot is the sum of the AMOUNTS of the splits in the
> lot.  The gain/loss is the balance of the the VALUES of the splits in
> the lot.

The problem is that gnucash is creating/destroying money in stock
accounts.  For example, I transfer $100 from income into a stock account
and buy 10 shares of CSCO at $10 each.  The next day I sell those shares
at $11, and transfer $110 out of the stock account to a cash account.  I
have a net $10 gain, but that gain is not posted to an income account
and cannot be posted to an income account given the current state of
gnucash. It has simply been created out of thin air.  Try this in a
brand new account tree and you'll see that after two transactions, total
income is $100 but total assets is $110.

David