Advanced Portfolio Report

[Richard Ullger]

On 11/02/14 06:25, Mike Alexander wrote:
> --On January 28, 2014 12:33:09 AM +0000 Richard Ullger
> <rullger at gmail.com> wrote:
> 
>> If the income is entered as a split of a dividend reinvestment where
>> you have a stock purchase, the income recorded on the report is the
>> consideration of 366.95 instead of the actual income of 374.92. For
>> example,
>>
>> Acc        Tot Buy        Tot Sell
>> Stock Account    366.95
>> Commission    3.66
>> Stamp Duty    1.83
>> Cash                372.44
>> Income            374.92
>> Cash        374.92
> 
> I'm working on the advanced portfolio report to try to make it handle
> this better.  It's non-trivial to fix, but I think I know how to do it.
> However, I have a question about the way these transactions are handled.
> 
> This transaction leaves 2.48 of the dividend unspent and held in the
> Cash account.  I gather that this is an account that can only be used to
> round up future dividend transactions to an integral number of shares. 
> Is this correct?

In this particular account, any unspent dividend is not rolled up for
future automatic reinvestment and remains unspent. The remaining cash is
available for other purchases.

I have in the past had an account for employee share ownership where the
dividends were segregated and used to purchase the maximum number of
whole shares. Any unspent dividend would be used in future dividend
reinvestment purchases.

In either case it was not possible to purchase a fraction of a share in
a company. It was however possible to purchase a fraction of a unit in a
Fund and in the case of a fund holding, the whole dividend would be used.

> The problem is that this money will look like new
> money invested in the stock when it is used in a future dividend
> transaction, but that's not really correct.  The problem is even worse
> if you put the entire dividend into the Cash account and then use some
> of it to reinvest in a separate transaction.  Then the entire dividend
> looks like money in.  I guess the solution would be to somehow recognize
> this Cash account as special, assuming I'm understanding how it is used,
> and not count money coming from it as money in to the stock account.

There is nothing special about the cash account. It is a cash account at
my broker that contains cash that is available to invest. It receives
cash that I transfer in from my bank account for me to purchase shares.
It receives cash from dividend and interest income and also from share
sales. The cash account is set up within gnucash as an account under a
broker parent account and at the same sub-account level as each of the
stock accounts.

...:Broker
   Cash
   Stock1
   Stock2
   ...
...:Another Broker
   Cash
   Stock1
   Stock2
   ...

The only difference between cash that I have put in myself and dividend
income is that dividend income is entered into into the stock account
and investment cash is not. It should be noted that the cash account
receives dividend income from any of the stock accounts under the broker.

In my mind, money in is money used for share purchases that I have put
in myself (capital employed) and does not include dividend or interest
income. I would expect it to include charges for the original purchase
but not for the dividend reinvestment, where charges are paid from the
dividend. So money in would be the total purchase price of my original
investment and any subsequent investment not derived from dividend
income. Dividend/interest income can be identified as money entered into
a stock account containing a split to a sub-account of the income top
level account. Money in can be identified as the money used in a stock
account purchase that is not entered against the stock account as
income. Taking the above dividend reinvestment transaction as an example
(I have excluded some of the sub-account levels for brevity), income
would be £374.92, money in would be £0.00.

Recorded as one transaction:

Asset:Broker:Stock Account - 366.95 (Buy)
Expenses:Commission - 3.66 (Buy)
Expenses:Stamp Duty - 1.83 (Buy)
Asset:Broker:Cash - 372.44 (Sell)
Income:Dividend Income - 374.92 (Sell)
Asset:Broker:Cash - 374.92 (Buy)

Recorded as two separate transactions:

Dividend income transaction:
Asset:Broker:Stock Account - Blank split
Income:Dividend Income - 374.92 (Sell)
Asset:Broker:Cash - 374.92 (Buy)

Reinvestment transaction [1]:
Asset:Broker:Stock Account - 366.95 (Buy)
Expenses:Commission - 3.66 (Buy)
Expenses:Stamp Duty - 1.83 (Buy)
Asset:Broker:Cash - 372.44 (Sell)

For an initial investment (if I were buying the shares with my own
money) [2], income would be £0.00, money in would be £372.44:

Asset:Broker:Stock Account - 366.95 (Buy)
Expenses:Commission - 3.66 (Buy)
Expenses:Stamp Duty - 1.83 (Buy)
Asset:Broker:Cash - 372.44 (Sell)

As you can see, the initial investment [2] and the reinvestment (when
entered as a separate transaction) [1] are identical, so I'm not sure
how you would distinguish between the two in respect of money in. I
currently enter dividend reinvestment transactions as a single
transaction containing a split for the income and in this respect, apart
from not including the charges, the money in column on the report in
v2.6.1 correctly excludes any reinvestments. I don't know what its
behaviour would be if the income and reinvestment transactions were
recorded separately.

Regards,

Richard.