Tracking realized gains/losses with mutual funds

Matthew Vanecek mevanecek@yahoo.com
08 Dec 2002 23:30:02 -0600


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On Sun, 2002-12-08 at 16:34, Errol Siegel wrote:
> > On Sun, 2002-12-08 at 11:06, Errol Siegel wrote:
> > > I have a question about tracking mutual funds.  I
> > have
> > > several mutual funds set up in gnucash.  I am able
> > to
> > > track the current value and unrealized gain/loss
> > just
> > > fine.  However, I traded shares of one fund for
> > shares
> > > of another fund and in doing so realized a loss.=20
> > The
> > > Balance Sheet Report does not seem to have a way
> > of
> > > showing this loss and instead shows an imbalance
> > (in
> > > the amount of the loss).  I am using gnucash
> > 1.6.8.=3D20
> > > Is this a known issue with this version?  Is there
> > > something I need to do differently to make this
> > work?
> > >=3D20
> >=20
> > Common accounting practice suggests creating
> > accounts to hold realized
> > losses/gains.  I think it would be an Income
> > account.  You should move
> > the amount of the loss/gain to the realized account.
> >=20
> > You may want to invest in a decent accounting book
> > that covers such
> > issues.  Once you understand the principles,
> > creating the accounts is
> > trivial.
> >=20
> > HTH a little,
> > --=3D20
> > Matthew Vanecek
>=20
> Thanks for the response.  I believe I have a full
> understanding of the accounting principles.  My
> question is purely technical: how do I do this with
> gnucash?  In the example I listed in my previous
> e-mail, I realized a loss, which would go into a 'loss
> expense' account (debit).  BUT - what account would be
> credited?  I don't see how it could be the mutual fund
> account since it tracks a balance of shares, not
> dollars.
>=20

The loss isn't realized until you actually sell the asset for a loss, at
which time you increase the balance of your "losses" expense or
whatever.  You would decrease the Asset account by the (original, I
think, or depreciated? not sure...) value of the asset, and the Cash
received would increase your bank account, and the realized loss would
increase the balance of the Loss expense account. In your case, perhaps
use the 2nd MF account instead of the Cash account, but the rest would
be the same?

Although, do you mean that after you executed the trade, the value of
the 2nd MF fell?  That would still count as an unrealized loss.  But if
at the time you executed the trade the value of the source fund was
greater than the destination fund (e.g., you traded 10 shares at
$10/share for 10 shares at $8/share), increase the balance of the dest.
fund by however much, and split the value of the rest into your Loss
expense account, would be my guess.  Your loss would be the difference
between the source and destination values, and added to the destination
value, would balance the transaction.

I'm getting a headache just thinking about it--perhaps an accounting
expert could help more...

--=20
Matthew Vanecek
perl -e 'print $i=3Dpack(c5,(41*2),sqrt(7056),(unpack(c,H)-2),oct(115),10);'
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*****
For 93 million miles, there is nothing between the sun and my shadow except=
 me.
I'm always getting in the way of something...

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