More Balance Sheet Woes

[Derek Atkins]

Hi,

David Brock <david at tubits.com> writes:

> But, there are changes in account balances that have *no* corresponding 
> entries in the General Ledger.  Mutual Fund "ABC" account went down by 
> 52.07 over the period, but no GL entry specifying that account.  Same 
> for another Asset account that changed by 0.01.

Yes, this is a known deficiency in gnucash 1.8.x -- it does not
properly account for buy/sell price differentials when converting
commodities.

> I have heard it said that the Balance Sheet is busticated, but not sure 
> if that problem was fixed in 1.8.10- is it possible that these errors 
> are not from my data, but from the report? 

Any time you transfer from one commodity to another, gnucash has the
potential to lose information.  This can cause the balance sheet to
get out of balance.  It's certainly the case that all 1.8 versions of
gnucash have this deficiency.

Your best bet is to manually handle any cap-gains or cap-losses from
the sale of assets by adding a balancing split to the sale
transaction.  In short, here's the issue:

1) Each transaction is balanced in the "transaction currency".  E.g.,
   you buy 20 shares at $10, so it balances at $200.
2) Accounts always maintain the balance of the commodity, not the currency.
   E.g. a stock account keeps track of the number of shares purchased,
   not the value of those purchased shares.
3) There is an implicit value of a stock account, i.e. there's an
   implicit currency-value for all the shares you purchased.  This is
   what you see in the balance sheet.
4) When you sell stock, it balances the sale transaction (#1) and
   modifies the number of shares in the account (#2) but does not
   balance the implicit value of the account (#3).  So the balance
   sheet thinks you put (bought shares * buy price) into the account,
   and took (sold shares * sale price) out of the account, but has no
   accounting for the difference in value when buy price != sale
   price.

The next major release of gnucash should handle this much better, but
that's not ready for release, yet.

-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