commodity income/expense accounts?
Wm
wm+gnc at tarrcity.demon.co.uk
Sat Jan 24 07:00:13 EST 2015
Thu, 22 Jan 2015 16:11:35
<CA+E35_5BEZLQ5FYF8QaDFd9jHNB5J7y4jUMVLggHyKhCOtPrHA at mail.gmail.com>
Edward Doolittle <edward.doolittle at gmail.com>
>Asset accounts, on the other hand, could probably benefit from using
>non-currency commodities. To use an example in Peter Selinger's tutorial, I
>don't hold the value of my house as an asset, I hold the house as an asset,
>so I would like to be able to list "123 Rodeo Drive" (not my real address)
>as a commodity, of which I own 1 unit, in a sub-account of my fixed assets
>account.
... which has a value. Is there a reason for not using appreciation,
presuming Rodeo Drive is an attractive address and the cowboys and
indians are nice to each other [1] on the asset internally (i.e. within
your own accounts) ?
>In the olden days (i.e., as recently as five minutes ago), the "cost
>principle" in accounting would require that I enter the purchase value of
>fixed assets into my book and leave it alone until I sold the asset.
I'm thinking aloud, practically the situation may be as you describe
above for formal reporting. But is there a reason you can't keep both
views going? e.g. I have a pension rump that I check the value of once
or twice a year and include in my personal balance sheet but don't
report on tax forms because it was taxed at source and effectively
doesn't exist after repeated fund takeovers.
> That
>doesn't work well for me in terms of financial planning, however. One
>alternative is to book income (or expense) when the price of the house
>changes in my estimation, but that is really messy.
This is getting into tax and inheritance regimes but I think it can be
useful to book changes in an asset's value if you're planning on giving
it away depending, of course, on local rules which vary widely in how
many years before, etc.
> E.g., if I own a rental
>property and need to account for capital gains, I would need to do so all
>at once when the property is sold rather than in bits and pieces as the
>real estate market fluctuates.
As above, I think you can only speak for one situation (unless you know
more than one), i.e. this list is international, in some places you can
declare a gain or loss and pay or claim tax on it without having to do
an actual sale and buyback.
> The better way is to hold the house as a
>commodity and to use trading accounts to keep track of the unrealized gain
>or loss, which would simply become a realized gain or loss when the
>property is sold.
Umm, if the house is an Asset and the amounts recording the change in
value are recorded in a Trading account (which is Equity) doesn't that
solve the thought problem? You have an Asset, you record the change in
value through variations in Equity conveniently (or otherwise) called
Trading accounts [2]
> So I would be in favour of allowing non-currency
>commodities for asset accounts other than stock and mutual fund accounts.
Where would you value them in real world terms ?
I'm not sure a house is a good example, BTW, as there aren't any
international exchanges for them, or at least, there isn't one for my
home :)
[1] obs curious: is that perceived as offensive in any form either by
yourself or if not by you then generally, Edward ? Is it just a tired
joke people (not me) presume you'll use and you play along ?
--
Wm...
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