Need better documentation on using Lots [Was: Chapter 8 - investment accounts]
Philip Walden
pcwalden at comcast.net
Wed Sep 9 14:41:34 EDT 2015
David Carlson wrote:
> My last message only covered the simple case where the security asset
> account had been completely emptied. Another case that is very common
> and hopefully the one that the Show Lots dialog was intended to
> address is the one where there are still shares remaining in the
> security account. That is the one where it is crucial that the
> realized capital gain for each transaction is correct for the
> particular shares involved, so that the remaining cost basis (and
> unrealized gain) is correct for the remaining shares.
>
> Since there is a decision about which shares to select from a pool of
> shares that may not all have the same cost basis per share, the Show
> Lots dialog must be intended to assist with this decision, or at least
> with tracking the cost basis and the resulting gain or loss. It should
> be capable of finding the correct cost per share of whichever shares
> are selected to be sold. By inference, then, the aggregate cost of
> the remaining shares (and the unrealized gain on those shares) should
> be correct. Commissions are real and they should be treated
> consistently whether they are tracked separately or included in the
> cost basis and sale proceeds. Then there should be a way to generate
> a report of what the dialog did and what is left after the process is
> completed. I suspect that part remains to be implemented.
AFAIK, the "View Lots..." screen provides a "Scrub Account" and a
"Scrub" on a specific lo automation. One can also use the "<<" and ">>"
buttons to select specific records (splits) for the lot. The Scrub does
a FIFO as selection, as John has described. I find that of no use for
me, especially when migrating my stock portfolio from Quicken. I have
chosen to use the "<< >>" selections.
The "View Lots..." screen does display all lots in an account and the
balance of stocks remaining in each lot. There is a gains column, but it
only shows realized gains. The screen is clunky to use. It pops up to
small and one must expand it to see anything. Also I have to sort on the
"Opened" column to get and order that makes sense. For details, one must
select each lot and view the details in the "Splits in lot" window.
There is no report I can find that seems to produce relevant view of the
results.
>
> I think that GnuCash is not equipped to show directly which lots are
> which, and it does not have a test to show if the cost basis (and
> unrealized gain) in a security account is correct when there are still
> shares remaining in the account.
I do not know either
>
> The bottom line that leaves me uncomfortable then is that without a
> lot report there is no tool to verify whether the show lots dialog was
> used, whether the realized gains were correctly transferred out of the
> security account as the lots were closed and whether future sales will
> indeed be assigned to different lots than were previously sold.
>
> Also, if any of the cost basis/unrealized gain remains unresolved
> after a lot is closed, eventually the books will be incorrect as shown
> by the trial balance report for overall balance, and by detailed
> balance reports for the accounts that have errors. Unfortunately,
> balance reports for accounts either show the cost basis or the
> unrealized gain, but not both at the same time, nor does the report
> show whether it is showing Average Cost, Weighted Average, Most Recent
> or Nearest in time values (two or three of which come from the
> internal price table in the data file. I have no clue where Weighted
> Average comes from.) The user just has to remember which price
> source he selected when he configured the report.
True, but my net worth is such that I do not depend on unrealized gains
much. So I guess I am okay with the current situation.
Personally I have never been able to get cost basis to match my
brokerage statement (i.e. 401K), except when I use specific lot tracking
(i.e. stock brokerage). So for the former, I fallback on the brokerage
reports during tax time.
>
> On Tue, Sep 8, 2015 at 8:33 PM, David Carlson
> <david.carlson.417 at gmail.com <mailto:david.carlson.417 at gmail.com>> wrote:
>
> Philip,
>
> When I asked "Does it zero out the value of the security asset
> account that held the
> security before it was sold" I was not referring to any
> transaction or record, whatever that might be. I meant to ask
> "does the sum of all currency into and out of the now empty
> security account equal zero?" You can answer that question by
> running a balance report on that account alone and see if both the
> number of shares is zero and the unrealized gain shown at the end
> of the report is also zero.
>
> The Show Lots dialog should be generating a transaction or series
> of transactions that drives the unrealized gain to zero. Those
> transaction(s) should (I presume) be the ones that are also
> generating the orphaned gains that need to be re-assigned to the
> correct Capital Gains(Income) account(s) to be linked to the
> proper brokerage account at tax time.
>
> Then my next question was whether Show Lots dialog includes the
> brokerage charges in those orphaned gains. If it does, it must be
> separately transferring those expenses from some other account to
> the orphaned gains account, because they cannot come out of the
> security asset account unless the user has chosen to bury
> commissions altogether, and only use net amounts. In either case,
> we should know how it works to be sure that our results are correct.
>
> Using only net (including commissions) amounts works, if it is
> done consistently, but the trade-off is that GnuCash does not show
> the actual trade price in the buy and sell transactions. Other
> threads in this list and the Dev list have made it abundantly
> clear that many users want the price to be shown accurately, even
> if it does not work out exactly due to rounding errors.
>
> By the way, using only net amounts makes for simpler (less
> detailed) transactions in GnuCash and gets you closer to seeing
> numbers that match what your broker will report in the 1099 to the
> IRS.
>
> Which method works better for you?
>
> David C
>
> On Tue, Sep 8, 2015 at 6:07 PM, Philip Walden
> <pcwalden at comcast.net <mailto:pcwalden at comcast.net>> wrote:
>
> David Carlson wrote:
>
> On 9/8/2015 1:08 AM, Philip Walden wrote:
>
> John Ralls wrote:
>
> On Sep 7, 2015, at 5:08 PM, Philip Walden
> <pcwalden at comcast.net
> <mailto:pcwalden at comcast.net>> wrote:
>
> John Ralls wrote:
>
> On Sep 7, 2015, at 9:52 AM, Philip
> Walden <pcwalden at comcast.net
> <mailto:pcwalden at comcast.net>>
> wrote:
>
> John Ralls wrote:
>
> On Sep 6, 2015, at 3:04 PM,
> Philip Walden
> <pcwalden at comcast.net
> <mailto:pcwalden at comcast.net>>
> wrote:
>
>
> WRT the "Concepts of Lots",
> per the discussion below I want to
> use lots in my stock accounts,
> but the document "Lots
> Architecture & Implementation
> Overview" only talks about the
> concept and does not give many
> clues as to how one should use
> the View Lots... screen.
>
> For example, what does Scrub
> Account do? What does Scrub (a
> record) do? What does the
> Splits Free and Splits in Lots
> mean or
> do.
>
> I have experimented several
> times only to get confused as to
> what is happening and end up
> backing out the work for fear of
> going down a rat-hole and
> ruining my stock gain/loss
> reporting
> integrity.
>
> I sort of understand the
> concept, but how is it
> implemented in
> the View Lots... screen? I
> cannot find anything helpful
> in the
> tutorial.
>
> My particular circumstance is
> that I have many old stock
> holdings in several accounts
> with lot tracking done on paper.
> I'd like to get them into gnc
> if I can. So the "automatic"
> scrubbing and lot set up does
> not seem to work for me as I
> already have prior lot
> database I'd like to enter;
> and then it
> could be that I just do not
> understand the View Lots... screen
> and its nomenclature.
>
> Thanks in advance for any help
> or pointers
>
> AS you probably know there are a
> variety of strategies for
> grouping lots and for deciding
> which lot is the one you sold.
> GnuCash supports exactly one: A
> lot consists of a single buy
> transaction and sales are
> first-in, first-out. If that’s not
> what
> you want, you have to handle all
> of it manually and ignore the
> View Lots dialog.
>
> Regards,
> John Ralls
>
> Hi John
>
> Thanks for your swift reply. I think
> FIFO will work for me, but I
> am having trouble translating the
> "Concepts of Lots", the only
> documentation that I can locate, to
> the "View Lots..." screen
> functionality. For example, the screen
> menu button "Scrub" and
> what it does is not documented as far
> as I can determine.
>
> I was hoping for some kind of
> tutorial/pointers about how the
> screen functions translate to the
> "Concepts of Lots". Maybe there
> isn't any?
>
> Also, you mention a "manual" method
> not using the "View Lots..."
> screen. I cannot seem to find any
> other method, manual or
> otherwise, for "Lots" anywhere in gnc.
>
> _
>
> Philip,
>
> The original subject of the thread you
> hijacked was “Chapter 8 -
> Investment accounts”. Have you studied
> that chapter?
>
> Chapter 8 of the guide is really titled
> “Investments”, and the
> English version can be read online at
> http://www.gnucash.org/docs/v2.6/C/gnucash-guide/chapter_invest.html.
>
> Regards,
> John Ralls
>
> Hi John
>
> Yes I have studied Chapter 8 intently,
> particularly the 8.7 Selling
> Stock section. There is no mention of the
> "View Lots..." screen
> anywhere in that chapter.
>
> The 8.7 section discusses manually creating a
> stock sell splits, but
> There is no mention of how to specify a lot
> associating the sale
> with a buy.
>
> So I am assuming there is no documentation
> documenting how to use
> the "View Lots..." screen.
>
> After some painful experimentation I have come
> up with a somewhat
> poor recipe to record lots and capture capital
> gains. The
> pain/poorness comes from trying to translate
> the "proceeds", "cost
> basis" and "gain/loss" from my broker account
> reports into the "sell
> price" and "commission" in gnc, such that the
> capital gains gets
> recorded correctly. However, I do not feel
> that is a gnc problem.
>
> I'd like to thank "Mike" in a previous post
> for the clues to figure
> it out.
>
> Here is the recipe I am going to use going ahead.
>
> 1. record buy of stocks with care to get
> accurate cost of shares.
> 2. Actions > View Lots...: Select the added
> stock purchase record,
> press create lot.
> 3. record sell of same stocks. Do not follow
> Chapter 8.7 as it
> includes the gain/loss in the split. The split
> should only have the
> proceeds to the asset account, the commission,
> and the
> shares-price-sale.
> 4. Actions > View Lots...: Select the lot with
> the stocks just sold.
> The "Splits in Lot should show the selected
> purchase. The Splits
> Free should show the sale just created.
> 5. Select the sale in the Splits Free window.
> 6. Press the >> button to associate the Sale
> with the Buy.
> 7. Close the View Lots window.
> 8. An Orphaned Gain record should have bee
> automatically created
> with, hopefully, the correct gain or loss
> amount. Edit the record to
> direct the gain/loss to the appropriate short
> or long capital gain
> account.
>
> Philip,
>
> I meant to study Chapter 8 to understand how to do
> it manually. There
> is no documentation on the View Lots dialog box.
> What’s more, I’ve
> tried it a few times and found that it works well
> in simple cases and
> less well when there are overlapping buys and
> sells — but I’ve only
> tried it using the “Scrub Lots” button which does
> your steps 5 & 6
> automatically. Since you seem to have worked out a
> semi-automatic
> approach I suggest that you create a fake book and
> test it out in the
> scenarios you expect. If it works consistently for
> you, great!
>
> Chapter 8.7 doesn’t include the gain in the split,
> it creates a new
> split pair in the transaction. If you prefer a
> separate transaction
> that’s OK, just create the splits as 8.7 explains
> in a new
> transaction instead of in the sell one.
>
> Regards,
> John Ralls
>
> Thanks John,
>
> Looks like I can do what I need by avoiding the
> "Scrub" button
> automation and just use the ">>" and "<<"" buttons to
> select sale
> transactions to a specific Lot-Buy. One buy per lot.
>
> When I use the above method, a separate Gain is recorded
> automatically. That is why I do not add one to the
> split within the sale.
>
> Again, thanks for your patience.
>
>
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>
> Philip,
>
> It is interesting that you have 'discovered' a part of the
> Show Lots
> feature that had been lost due to lack of documentation.
> I am curious
> now how far that feature goes.
>
> Does it zero out the value of the security asset account
> that held the
> security before it was sold
>
> It does not zero out any record. Each buy and sell remains a
> separate record (split). You have to use the View Lots...
> screen to see the remaining number of shares in each lot.
>
> and generate an offsetting income or loss
> value?
>
> When you select a sell with a lot containing a buy, it
> automatically generates a separate Capital Gain/Loss split.
> The gain appears to be calculated by the subtracting the cost
> per share in the buy record, times the number of shares sold,
> from the sell price.
>
> Does it also identify both the opening and closing commissions
> and include them in the calculation?
>
> No. However, I include the commission in the sell record
> (split). If you suffer from buy commissions, I would include
> them in the buy record (split). You may find recording
> commission easier using a different method.
>
> If so, where does the offset go
> for those commissions? Would that go to a different
> income/expense
> account or to an adjustment to retained earnings?
>
> See previous comment
>
> Does it work if the
> original lot was partly sold on one date then the rest
> sold on another
> date?.
>
> Yes, you can select multiple sell records on different dates.
> I assume you cannot add anymore once the lot quantity is
> exhausted. I have not tested that. It would be an error case
> regardless.
>
> Does it work if multiple lots are sold at the same time?
>
> Yes, just record every sale, then individually select each
> record from the Free Splits window on the View Lots...
> screen. Avoid the Scrub mechanism(s) if you want to control
> the process as it will always just chose the first available lot.
>
>
> If it does some but not all those things, that should be
> documented too
> and possibly used as a basis for a request to improve the
> functionality
> of that feature.
>
> I agree that I am able to use the Lot functionality and that
> incorporating a description in the documentation would be of
> benefit and would have saved me a few days trying to figure it
> out.
>
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