Question About Investments

[Mark Phillips]

David,

Thanks for your reply. I am trustee for my mother's estate, and I am using
gnucash to track her estate financial health and report monthly balance
sheet and income statements to the other beneficiaries to her estate (my
two sisters). My mom's accountant does not use gnucash and relies on paper
statements, so this is not for tax purposes.

For example, one of her statements has the following summary, which is what
I am trying to capture in gnucash:
***Fund A***
Total Assets - Beginning Balance    $ 100,000.00
Cash Deposits
Cash Withdrawals                         -237.00
Income and Distributions                  289.00
Other Transactions
Change in Market Value*                 -6.567.00
Total Assets - May 31, 2013         $   93,485.00

And the other account provides this:
***Fund B***
CHANGE IN ACCOUNT VALUE             Current Period
BEGINNING VALUE                     $104,876.64
Additions and Withdrawals                $34.00
Income                                  $131.38
Taxes, Fees and Expenses                 $56.00
Change in Investment Value           ($4,419.35)
ENDING VALUE (AS OF 05/31/13)       $100,566.67

I want to show the current value of the asset in her monthly balance sheet,
but not to account for all the details of how the balance changed. The
other beneficiaries also have a copy of the monthly statements from the
financial institutions for these funds, so they can use that to see the
details if they want to.

I have been "dumping" all the changes (positive and negative values) into
an income account called "change in market value" for these assets, and I
have an asset account that shows the current value at the end of the month
for each fund. I don't have a separate expense account for losses, I just
put all the values into one income account.  Is this correct, or is there a
better way?

For Fund A, the Cash Withdrawals are actually sent to her as a check, so I
just use her checking account to receive the money and another income
account (not the change in market value) to balance the transaction.

Am I on shaky ground here?

Thanks,

Mark


On Thu, Jul 4, 2013 at 11:34 PM, David Cousens <davidcousens at bigpond.com>wrote:

> 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
>
>
>
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