Trial balance failure after stock split

[Fred Bone]

> On Mon, 18 Jun 2007 09:09:25 pm Fred Bone wrote:
> > I'm probably doing something wrong, but cannot see what. I used the
> > "Stock Split Druid" to record a consolidation, and it resulted in a
> > mismatch when I do a Trial balance.
> >
> > Using v2.1.3 for Windows.
> >
> > I started with 731 shares bought for 487.80.
> >
> > The company did a "Share Consolidation", one for three with a cash
> > distribution of 146.60 (this was via an issue-and-redemption of "B"
> > shares, but that's a technicality). I ended up with 244 shares.
> >
> > In the Druid, I entered:
> >  (Stock Split Details)  Shares:  244-731
> >  (Cash In Lieu)         Amount:  146.20
> > chose suitable accounts for the cash-in-lieu and left everything else
> > alone.
> >
> > The transaction shows in the stock register as
> >  Num     Description                    Tot Shares   Tot Buy   Tot Sell
> >          Stock Split                          -487                  487
> >  Split                  Assets:<>:PON         -487
> >          Cash In Lieu   Assets:<>:Cash                146.20
> >          Cash In Lieu   Income:<>:PON                            146.20
> >
> > The net result in Trial Balance is that the value shown against the
> > relevant stock has reduced from 487.80 to 97.72, with the two other
> > accounts each increasing by the expected 146.20, for a net discrepancy
> > in the final totals of 487.80-97.72=390.08.
> >
> > Everything else (that I've thought to check) looks correct.
> >
> > What should I have done differently?
> >
> > Where does it get that 97.72 figure from???
> >
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> 
> Are you saying that you bought a bundle of 731 shares for $487.80?  So the
> cost of each share was $487.80/731 or 66.73 cents a share.  You disposed
> of 487 shares and received $146.20, so the cost of the 244 shares you now
> hold was (notionally) 487*$0.6673 less cash $146.20 = $178.77, or 73.2
> cents a share.  To my thinking, that should be the value of the stock.

I entirely agree. Though the currency is actually GBP.

By further playing around I've found that the 97.72 is actually its idea 
of the current valuation, based on the default behaviour of using 
"Weighted Average" (of what, I have no idea) as "Price Source". I can get 
a more reasonable figure by opting for "Most recent" instead; but it has 
no effect on the imbalance.

> The cash in lieu went to Cash and Income;  it won't affect the value of
> the shares if you did it that way.  In my calculation, it is debited to
> Cash (Increase) and credited to PON (asset reduced.)

Confirmed: see below.

> More than that, I can't say.  I don't buy and sell shares, and have no
> experience of Gnucash's druid.
> 
> Gnucash won't leave the books unbalanced.  The $390.08 will have to have a
> matching entry, even if it is in Capital or another Equity account.

Oh, but it has: at least according to the Trial Balance.

I have duplicated this with an otherwise empty book:

* File->New->New File
* in the Druid, select "Investment Accounts" and left everything else 
default
* Tools->Security Editor ; Add, symbol=PON, type=LSE, fraction=1
* under Assets:Investments:Stock, create a new account "PON" with 
security type=PON
* open this account and add a transaction to Buy 731 for 487.80 (debiting 
Equity:Opening Balances)

At this point Trial Balance shows all blank except for 487.80 once in 
each column, against PON in Debit and Opening Balances in Credit

* Actions->Stock Split ; see above, except this time nothing under Cash 
In Lieu.

Now Trial Balance shows 97.72 in debit against PON, 487.80 in Credit 
against Opening Balances, for net imbalance of 390.08 (as before).

The transaction (split view) shows only one line.

Creating a current value for PON and changing the report option to use 
"Most Recent" as "Price Source" causes a figure of zero to appear against 
PON and the 97.72 to show against "Unrealised Gains". Using Price Editor 
to create an arbitrary current price makes that show against PON, and the 
"Unrealised Gains" figure (but not the label) to vanish. The column 
totals for both Debit and Credit are increased by the PON valuation, but 
the imbalance is still present.

Further experimentation shows that positive Stock-Split amounts do not 
affect the apparent balance, but negative ones do. For example, changing 
the -487 to +487 produces a Trial Balance that balances, but then adding 
a -487 split (to get the units back to 731) gives a value of 209.14 
(instead of 97.72) for a different imbalance.