Need better documentation on using Lots [Was: Chapter 8 - investment accounts]

[David Carlson]

On 9/9/2015 1:19 PM, Philip Walden wrote:
> David Carlson 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.
> I am not much of a gnc aficionado and my grasp of nomenclature is
> somewhat weak.
>
> I am having trouble finding a "Balance Report" for the "stock"
> account. I see a global "Reports>Assets > Balance Sheet" report, but
> no Balance Report" for a specific account. I see only a "Reports >
> Account" report.
>
> If you can point me to the right report, I can build a dummy account
> and test it. My working account has a non-zero number of stocks.
>>
>> 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.
> It is generating orphaned gains and I am re-assigning them to short or
> long term gains.
>>
>> 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.
> As far as I can tell, it does not include brokerage charges in the
> orphaned gains. I have been adding them in the stock sale split and
> the generated orphaned gain appears to take the brokerage charges in
> the sale split into account.
>>
>> 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.
> Yes, I have been doing it this way as my brokerage does not report
> commissions very clearly. Yes, it does affect the stock price history,
> but their commission fees are low and I am not that fussy. I guess you
> cannot have it both ways.
>>
>> 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.
> Exactly.
>>
>> Which method works better for you?
> Skipping commissions and using net works for me most of the time. Last
> year I had the situation of recording a large stock option
> exercise-with-immediate-sell. The commission was significant enough
> that I could not ignore it.
>>
>> David C
>>
Snip...

First, if you have a data file that is you consider 'real' then I
suggest making a copy or two as Michael suggested in another thread to
use for testing.

There is a lengthy set of options for most reports, and, alas, that is
another area that needs better documentation.

The Balance Report listed in the Reports>Asset & Liabilities section can
be set to include any asset and liability accounts that you want and it
can be set to report balances on any date and there are more options as
well.  For the test that I first suggested lets say that you sold all of
the Google shares that you once owned.  You would choose
Options>Accounts then click Clear All and scroll through the list to
select the Google stock security Account where all of the shares have
been sold, and there are no shares remaining.  The report options box
can be expanded to show more accounts at a time.  For consistency,
choose Commodities>Price Source>Average Cost and I think all the
defaults under Display are ok , and choose General> Balance Sheet Date
to a date after the last sale.  With that setting there will be no
unrealized Gain or equity if all of the value of the account has been
removed and converted to an appropriate gain or loss.  If there is a
value, then some of the cash into that account has not been removed, and
the imbalance will ultimately skew your net worth report.  Since the
Show Lots dialog is supposed to help you achieve that balance, the
report would test whether it succeeded. 

For security accounts that still contain shares, the balance report with
those settings  should be showing the remaining number of shares and and
the cost basis total for all those shares.   I think that should
correspond to the Free or un allocated lots in the Show Lots dialog,. 
If the cost does not look reasonable for that number of shares, there
could be a problem.

David C