Did I set this up correctly - house with negative equity
Jeremy Miller
qatman at gmail.com
Sun Dec 13 02:22:46 EST 2009
On Sat, Dec 12, 2009 at 21:32, Alex Zuroff <azuroff at gmail.com> wrote:
>
> I have the following accounts set up:
>
> Assets:Fixed Assets:House:Cost
> Assets:Fixed Assets:House:Unrealized Gain
> Income:Unrealized Gains
>
> Is this the correct approach to take even when our house is upside-down?
>
This is how I handle the situation for marketable securities (stocks, bonds,
etc.).
Record the house purchase:
Assets:Fixed Assets:House:Cost Debit $300K
Equity:Opening Balance Credit $300K
Record the initial value at GNUcash setup:
Equity:Unrealized Gain or Loss on Investments: Debit $50K
Assets:Fixed Assets:House:Unrealized Gain Credit $50K
Now your total value for House is $250K and your total value for Equity is
$250K.
If you want to mark-to-market at a later date, this is usually done directly
to the Equity:Unrealized Gain or Loss on Investments account. Suppose at
year-end 2009 you want to update the house value to $275K. Then the entry
would be
Assets:Fixed Assets:House:Unrealized Gain Debit $25K
Equity:Unrealized Gain or Loss on Investments: Credit $25K
leaving House at $275K and Equity at $275K.
Suppose you then sell the house for $325K. I prefer to do this in three
steps: mark-to-market, sale, and reclassify previously unrealized capital
gains. The entries would be
Mark-to-Market
Assets:Fixed Assets:House:Unrealized Gain Debit $50K
Equity:Unrealized Gain or Loss on Investments Credit $50K
leaving balances of House $325K and Equity $325K
Sale of House
Assets:Cash Debit $325K
Assets:Fixed Assets:House:Cost Credit $300K
Assets:Fixed Assets:House:Unrealized Gain Credit $25K
leaving balances of House $0K, Eq:Opening Balance $300K, Eq:Unrealized Gain
$25K
Reclassify Previously Unrealized Capital Gains
Equity:Unrealized Gain or Loss on Investments Debit $25K
Income:Realized Capital Gain Credit $25K
So in the end you have Cash $325K DR, Eq:Opening Balance $300K CR, and
Income:Realized CG $25K CR. At the end of the year when you close the
books, the income will get closed to Retained Earnings.
Jeremy
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