Stock trades and realized gains/losses
Derek Atkins
warlord@MIT.EDU
Sat Jan 11 16:29:33 CST 2003
linas@linas.org (Linas Vepstas) writes:
> > You started to give an example with Enron, but you never finished it.
> > Could you, please? To me, the fact that Enron stock went from
> > $100/share to $1/share does not change the basis of your stock
>
> It doesn't change the cost basis, but it is needed when preparing
> a formal balance sheet for a business. You don't want to cavalerly
> say 'gee, todays price for enron is x', you want to say 'we have
> adjusted the book value of our enron holdings to reflect the reality
> of the marketplace, and this adjustment is shown in the 'unrealized
> losses' line'.
So what you are saying is that if you ever DO realize the loss, you
have to recapture that gain/loss and, in effect, "re-point" all those
"unrealized loss" transactions to your realized-loss account...
Meaning you need to know whether an "adjustment transaction" is for
realized or unrealized gains/losses.... How, "special".
Obviously you cannot just change the account of the un-realized
gains/losses, right? So, you would need to add a new txn from
unrealizedGL to realizedGL. That's what I mean by "special".
> The formality of creating an auditable transaction like this has
> some real reporting advantages. Especially if we had some juicy
> profits because enron later went up ;-> Ahh, yes, accounting ....
Sigh. Can I go shoot someone now?
-derek
--
Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
Member, MIT Student Information Processing Board (SIPB)
URL: http://web.mit.edu/warlord/ PP-ASEL-IA N1NWH
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