Stock price changes and asset-equity balance

[David T.]

Clayton--

Keeping in mind that I am Not An Accountant, my understanding is that in that equation you cite, the current value of stocks is immaterial. What matters is the original cost to you. Once you have purchased a share of stock, that stock's value to you is what you paid for it. It truly only takes on a different value once you actually sell it, at which point you create a split for the gain or loss.

You could look at the difference between Gnucash's calculation and the (correct) zero balance of the grand equation as a barometric measure of your investments' performance. The difference is the overall unrealized gain or loss. 

I am not looking at the reports right now, but I believe that one of the options is to select different dates for pricing such assets, and changing it to purchase price would hold these steady.

David

--- On Tue, 1/5/10, brad <bradhaack at yahoo.com> wrote:

> From: brad <bradhaack at yahoo.com>
> Subject: Re: Stock price changes and asset-equity balance
> To: 
> Cc: gnucash-user at gnucash.org
> Date: Tuesday, January 5, 2010, 11:13 AM
> I'm probably misunderstanding your
> goal, but if all you want is the
> current value of your investments, the Investment Portfolio
> report or a
> Balance Sheet report (with selection of appropriate accts)
> will give you
> that.
> 
> On Tue, 2010-01-05 at 13:13 -0500, Fred Frigerio wrote:
> > Traditionally I don't think the value of assest is
> changed on the books like
> > that. However, I do keep track of that annually for
> the house and cars.
> > Essentially I have an Income (House except for last
> year :0 ) or Expense
> > (cars). I don't really worry about the stocks until
> they become a realized
> > gain or loss. I guess you could do something similar
> quarterly or as often
> > as you'd like. I don't believe there is an automated
> way for GC to track
> > stocks, etc in the way you (and I) would like.
> > 
> > Fred F
> > 
> > 
> > On Tue, Jan 5, 2010 at 1:01 PM, Clayton Macdonald
> <cm1950 at fastmail.fm>wrote:
> > 
> > > This is the way I see it: Equity is what is owed
> the owner, i.e., it is a
> > > liability, just like any other. Assets, on the
> other hand, are what's
> > > available for use. N.B. the basic accounting
> equation: Assets - Liabilities
> > > = Equity + (Income - Expenses). Alternatively:
> Assets + Expenses = Equity +
> > > Liabilities + Income
> > >
> > > This is my problem: when I manually update stock
> prices, the value of the
> > > asset side of the above equation changes in my
> GnuCash file. GnuCash does
> > > not seem able to make any balancing change on the
> liabilities side of the
> > > equation.
> > >
> > > Maf. King - many thanks! - has been trying to
> help me see where I'm messing
> > > up, but I still don't get what I can do except
> track investments in an
> > > entirely separate set of accounts and manually
> transfer changes. Is that the
> > > only solution? Any advice?
> > >
> > >
> > > On 10/01/05 12:03, Maf. King wrote:
> > >
> > >> On Monday 04 January 2010 23:42:24 you
> wrote:
> > >>
> > >>
> > >>> On 10/01/04 00:48, Maf. King wrote:
> > >>>
> > >>>
> > >>>> On Sunday 03 January 2010 15:46:39
> Clayton Macdonald wrote:
> > >>>>
> > >>>>
> > >>>>> I'm a new user who successfully
> set up an initial group of accounts
> > >>>>> such
> > >>>>> that assets etc. and equity etc.
> balanced. Assets consist of stocks;
> > >>>>> equity consists of opening
> balances. Looked good. Eventually, I updated
> > >>>>> the current prices of my various
> stocks and mutual funds using the
> > >>>>> price
> > >>>>> editor. The result was a
> significant imbalance between assets and
> > >>>>> equity, i.e., a price update
> affects the value of assets but does not
> > >>>>> seem to affect the value of
> equity. I am sure there is something very
> > >>>>> obvious that I am missing - or
> something very stupid that I have done.
> > >>>>> Any suggestions?
> > >>>>>
> > >>>>>
> > >>>> Hi,
> > >>>>
> > >>>> Would this be a case of "unrealised
> gains"? - Until you actually sell
> > >>>> the
> > >>>> stocks, they only have a theoretical
> value.
> > >>>>
> > >>>> Welcome to the list and GC, by the
> way.
> > >>>>
> > >>>> Maf.
> > >>>>
> > >>>>
> > >>> Thanks for the quick reply!
> > >>>
> > >>> Yes, of course the gains - lately, too
> often losses - are unrealized in
> > >>> terms of cash until the assets (stocks)
> are sold. Nevertheless, if I
> > >>> manually update the price of a stock
> using the price editor, Gnu Cash
> > >>> seems to treat that as a real change in
> the value of my assets, even if
> > >>> unrealized, e.g., if the price of my one
> share of XYZ Co. goes from $10
> > >>> to $5, the total value of my assets drops
> $5.  But the value of my
> > >>> equity does not change. (N.B.: /Assets -
> Liabilities = Equity + (Income
> > >>> - Expenses)...or?) /It seems to me that
> if my assets are considered to
> > >>> have changed in value, then my equity
> should show a commensurate change
> > >>> in value.
> > >>>
> > >>> In other words, the price editor seems
> only to affect one side of the
> > >>> balance sheet - it changes assets, but
> does not make any balancing entry
> > >>> in equity or other liabilities.
> > >>>
> > >>> What's the solution? Thanks!
> > >>>
> > >>>
> > >>
> > >>
> > >> By "equity" do you mean the "equity branch"
> of the accounts tree, or a
> > >> figure
> > >> in a report somewhere?
> > >>
> > >> If it is the former, then that won't change -
> it is a kind of
> > >> "placeholder"
> > >> equity for things like opening balances (or
> year-end closing zeroing
> > >> transactions, or shareholder capital etc.)
> rather than a real-time total
> > >> of
> > >> the accounting equation.
> > >>
> > >> HTH,
> > >> Maf.
> > >>
> > >>
> > >
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