Stock sales & balance

[Derek Atkins]

Hi,

> I vote for accounting to keep track of money, first and foremost.  If 
> the program can also do share accounting, so much the better, but 
> transactions should always balance in cash.  The default mode should 
> flag or prohibit unbalanced transactions, IMO. (whether cash or shares!) 
> Otherwise it's not double entry bookkeeping.

The problem is not balancing a transaction -- it's balancing MULTIPLE
transactions.  Gnucash enforces an invariant that all transactions are
balanced.  That works just fine.  When you buy 10 shares of stock
worth $100, you create a (balanced) transaction of 100 units of
dollars ($100 value) to 10 units of stock ($100 value).  This
transaction is completely balanced.

The problem occurs when you sell 5 shares.  What was the purchase
price of those shares?  How do you know what your CG/L is unless you
can somehow tie the puchase transaction to the sale transaction?  This
is the problem that GnuCash does not (yet) solve.

There is a proposal on the table to implement "Lots" to track this
information, but it's not finished (and wont be before 1.8).

You may say "well, don't keep track of the number of shares -- only
keep track of the cash".  Unfortunately, that doesn't work, either.
For one thing, it means you have no way to compute your net worth.
For another thing, there is no way to compute your holdings.  Third,
it still makes CG computations challenging.

> A paragraph on this subject in the documentation would help a lot, even 
> just to say that the situation is confused. :-)

I wholeheartedly agree that we need to mention the topic.

-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
       warlord at MIT.EDU                        PGP key available