treatment of unrealized gain/loss on stock holdings?

[tony B]

On Sat, 3 Feb 2007 22:13:46 -0500
"Alan Su" <su.alan at gmail.com> wrote:

> hi all,
> 
> in the gnucash tutorial/guide, i see the trusty old accounting
> invariant:
> 
>   Assets - Liabilities = Equity + (Income - Expenses)
> 
> If one is diligent about avoiding Imbalance-XXX and Orphan-XXX
> entries, this holds true in gnucash...until you add stock holdings
> into the mix and update their prices.  at that point, you effectively
> have an unrealized gain/loss that corresponds to the
> appreciation/depreciation of your holding.  this effectively throws
> the above equation out of whack: the value of the asset goes up
> without a corresponding credit to an account.  how are folks dealing
> with this?  manual updates to unrealized gain/loss accounts for each
> position, as is being discussed on another gnucash-user thread?
> 
> it seems to me that there should be an equity account called "accrued
> value" that is basically
> 
>    sum(value_of_stocks) - sum(original_cash_basis_of_stocks)
> 
> that gets automatically adjusted when stock quotes (and mutual fund
> quotes too, i guess) get updated.  (writing these adjustements as
> equity may not be the "right thing," but booking appreciation as
> income seems incorrect as well.)  i think it would be great if such an
> account could be maintained on a per-position basis, but that's just
> my opinion.  i'd be curious to hear what others' strategies are for
> dealing with this discrepancy (even if it's just "i'm ignoring
> unrealized gain/loss until the sale" =)).
> 
> thanks,
> 
> -alan


I checked in to the list a few days back to post essentially this same
question, so I was delighted to find Alan had already done the hard
work.  I'm surprised there has not been any response to his posting,
and I wonder if it just got missed or what.  Is this just the way it
works?  If so, how do you check on yourself to see if you mucked up an
entry?

Thanks for any replies,
tony