Stock gains/losses cause balance sheet imbalance

[Fabien Ninoles]

On Sat, Jan 05, 2002 at 07:43:57AM -0800, Nikunj Bansal wrote:
> Charles,
> 
> Thanks for the response.
> This is exactly where I am getting stuck in fact. I am trying to
> strictly follow the double accounting. In fact, my balance sheet is
> almost perfectly matched...  except that there is some flaw in the way
> I am doing the stock trades. The balance sheet is off by exactly the
> amount I lost in stock trades during the year.
> 
> This is how I am doing it. When I bought stock X, I show the money
> coming from cash as the double entry.  Hence cash gets reduced by
> $1000 and when I sold those stocks, say for $900... I do the reverse.
> The cash now increases by $900 and stock numbers fall back to 0.
> Now.. suddenly my assets (cash) has fallen by $100 but there is no
> corresponding Income/Expense to reflect this and hence the balance
> sheet is off. I have been struggling with how to do this correctly.

You stocks doesn't decrease by 900$ but by 1000$, 900$ going into your
cash account, and the others 100$ into the Capital Lost (expense).

In contrary, if you gain 100$, buying at 1000$ and selling them at
1100$,  you'll be decreasing your stock by 1000$, increase your Capital
Gains (income) by 100$, and increase your cash account by 1100$.

Another way will be to make a first transaction representating the
gain/lost between the Stocks account and the Capital Gain/Lost account
and another one representing the selling itself, between the stock and
cash accounts.

> Can u suggest in more detail.
> 
> Thanks
> Nikunj.

Hope this help.
BTW, I'm just an amateur,
not a professionnal.
Fabien
--
Fabien Niņoles                                               
fabien@tzone.org                 http://www.tzone.org/~fabien
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