Question on how to record share losses

Bill Gribble
Wed, 1 Aug 2001 09:49:38 -0500

On Wed, Aug 01, 2001 at 03:53:04PM +0200, TrackerChamp wrote:
> 2) In June, you realize (by using the price editor), that the share went up 
> to 11$ a piece. So you have a (unrealized) gain of 100$ because your shares 
> are now worth 1100$ The price editor (and Gnucash) shows you this in the 
> balance for your shares. They are now worth $1100. BUT there is no booking 
> that actually says, that you had an (unrealized) gain of $100. If you open 
> the wins/losses report, there should somewhere be a win of $100. This could 
> be an income account called "share wins".

Income represents money received from outside sources.  You aren't
actually receiving any money when the paper value of your stock goes
up, so it's not appropriate to represent it in an income account.
Unrealized gains should show on a balance sheet, but not as ledger
entries for your income and expense accounts.

Things only get "booked" when they actually happen, and in the case of
the sale of assets you won't show anything on an income account: you
have a Buy transaction exchanging bank balance for shares, and a Sell
transaction exchanging shares for bank balance.  There is no income
account involved.   

> 1) In May you buy 100 shares of e.g. "Linux Inc." for 10$ each.
> 3) in July, the share go down to $5 [and you sell] 

These are the only events that matter from an accounting perspective.
In the first event, you take $1000 from your bank account; in the
second, you put $500 back.  A portfolio analysis should show that you
sustained a $500 loss during this period.

However, this loss isn't an "expense" and doesn't need to be accounted
for by an entry in an expense account.  It's just a change in the
value of your assets.  It will show up on a balance sheet as Gain or