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

[David Carlson]

That is good to hear.

David C

On Thu, Sep 10, 2015 at 5:30 PM, Philip Walden <pcwalden at comcast.net> wrote:

> David Carlson wrote:
>
>> 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.
>>
> Thank you for the advice. It has been awhile since I ran any reports
> (since tax season).
>
> I performed the following test.
>
> 1. I created a test copy of real gnucash data.
> 2. Then I went to the stock account under test and created one (1) sell
> transaction for all the remaining stock in the account at a made up price
> and a significant commission.
> 3. I then selected Actions>View Lots... The "View Lots..." screen came up
> showing the sell record (2) in the Free splits window. It also showed all
> the lots I had created previously, basically one lot for every stock
> purchase at some date-and-price.
> 4. I clicked on "Scrub Account" to apply the one sell record (split) to
> all remaining lots.
> 5. The result was that all the lots in the account had a fraction of the
> sell allocated that zeroed out the shares in the lot. The original sell
> transaction (split) was changed such that the sell record was divided up
> into multiple sell records, one for each lot. In addition the same number
> of orphaned capital gain records were generated. The gain calculations
> looks like it allocated the commission to rationally to each gain.
> 6. I then ran a Reports>Assets & Liabilities>Balance Sheet report.
> 7. I changed the report configuration to just the stock account under
> test, the basis to average and the time to "today".
> 8. I re-ran the report and the unrealized gains and equity came out to
> zero (0).
>
> So, it looks like the gains are being computed correctly.
>
>>
>> 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.
>>
> I  went back to my real data and ran the Balance Sheet report using the
> "Most recent" price source. The result exactly matched my brokerage website
> report.
>
> So it looks as if all is working. My only issue has been the lack of
> documentation/tutorial coverage.
>
>
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