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

[Philip Walden]

David Carlson wrote:
> On 9/10/2015 5:30 PM, Philip Walden 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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> I started to test the View Lots and I got hung up on a use case
> already.  What if I only sell part of a lot?  Do I have to manually
> split the lot first before going into View Lots?  Maybe the "Scrub
> Account" feature would do that, but would it respect the rest of the
> manual matching that I had just done with the right and left arrows?
No need to split the lot. If you have a lot of 10 shares, and then sell 
5, just create the Sell transaction for 5 shares. Then when you view 
lots, manually select the lot with the 10 shares. At that point you can 
manually add the Sell to the lot using the >> button, or you can use the 
"Scrub" button. Once the Sell is added to the lot, you can see the total 
for the lot drop to 5 and a gain/loss transaction will be automatically 
created.