Question About Investments

[David Cousens]

Mark,

 

Mark is your accounting primarily for tax purposes , to provide evidence of
the value of the assets, or simply to monitor the current value of the
investment.

 

The standard approaches are based either using a historical value for the
asset at the time of purchase and, as any gains are unrealised until the
asset is sold, not taking them into account until such time as the assets
are sold  

or 

using a market based valuation as you suggest treating the unrealised gains
as income. You would presumably to treat capital losses as expenditure 

in this case.  One could use contra accounts to record such increases and
losses so that the record of historical value and the current value is
maintained in the same way you use a contra account to record depreciation.

 

Alternatively, one can use a market based approach as you suggest, treating
the gains as income. There are serious implications of the use of either
approach, for example, see
http://issuu.com/corinda/docs/accounting_treatment_of_unrealised_capital_gai
ns for some discussion which will depend upon the legal jurisdiction in
which you carry on your business and the specifics of the law in that
jurisdiction re tax, inheritance, etc.

 

 

Dr David R Cousens B. Sc., M. Prof. Acc., Ph. D.

Email: davidcousens at bigpond.com

Mobile 0420847319