Did I set this up correctly - house with negative equity

[Alex Zuroff]

Thanks.  That made sense, and now the balances look like I'd expect them to
look

Alex

On Sat, Dec 12, 2009 at 11:22 PM, Jeremy Miller <qatman at gmail.com> wrote:

> 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
>
>
>