Fixed asset appreciation?

[Walt Pennington]

Normally an unrecognized market appreciation on a depreciable asset is
not recorded until the asset is sold.  An example is a stock.  At the
end of the year, your stock may have either increased or decreased in
value, but you will not record any gain or loss until you sell the
stock.  

Most accountants would probably advise against trying to recognize
(create an accounting entry) an unrealized gain (no asset sale) and
increase your asset value.  The principal reason is that you cannot know
the asset's value until you sell it.  If the asset is a house, and the
housing market is hot, and your price may temporarily increase by 40%,
this could be offset by either a market decline or an alternate
appraisal at a lower value.  

Depreciation of assets are allowed by accounting rules and tax laws. 
Appreciation is not recognized (recorded) until realized (transaction
occurs).

Having read the above, if you still want to record the event, you would 

HOUSE                          15,000
    Unrealized Gain                 15,000

The gain is an income account.  

Walt Pennington



On Sat, 2003-09-06 at 08:18, Peter D. Pawelek wrote:
> Okay, I'm starting to get the hang of Gnucash (been using it for about a week, 
> no previous accounting experience). What I'd like to do is reflect the 
> appreciation of my house since it was purchased in 1999. I know the current 
> market value, but I've entered the original purchase value as a liability.
> 
> Having read the documentation, an example is given for asset depreciation in 
> which an expense account is setup to reflect the loss in the value of an 
> asset. 
> 
> Two questions regarding this, then:
> 
> (1) I suppose that to do the converse, I'd setup an income account to reflect 
> the increase in house value? 
> 
> (2) If so, how do I balance the income account? Draw from 'Equity' ?
> 
> Sorry if this sounds like an ignorant question, but I am an accounting 'n00b'.   
> ;)
> 
> 
> Love the program, btw.
> 
> Peter Pawelek
> 
> 
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