Help with transactions for sale of stock

Wed Apr 27 12:45:39 EDT 2016

Pam,

"Lots" is a murky subject in GnuCash.  In the old days, ie in the 2.4.x
series of releases (I think) the 'Lots" feature existed in GnuCash but it
did not work very well and was not understood by most of us.

More recently, as David T alluded to, it has been improved, but I am old
school and I am not convinced yet.  As you noticed, It still has escaped
being documented in the help manuals.

Regarding the apparent discrepancy in profit. The $1525 profit figure in
that example is the net profit that you expect to report to your taxing
authority, and it is different from the $1600 difference between the amount
that was originally paid for the Amazon stock and the amount received in
the sale. If we have chosen to track expenses such as commissions
separately, they get lines in the opening and closing transactions so that
the balances of the brokerage account and the security account remain
correct.  Many of us are lazy and we just lump commissions into the cost
and profit figures, and that works in some cases, but the value of the
security account will be incorrect after the sale and the trial balance
report will be incorrect, if it matters to you.

David T also pointed out while I was composing this reply that there is, in
fact a discrepancy in the tutorial that should be clarified.

In GnuCash we track the value of securities and expenses, income and
capital gains separately.  We tie the various parts together in the sale or
closing transaction by reducing the value of the security and increasing
the capital gain if we sell at a profit.

The examples in the help manual do not explain the importance of correctly
tracking the value of securities in GnuCash.  When you purchase a security
you are exchanging a certain amount of your currency for a certain amount
of the security.  Then, to keep things in balance for your trial balance
report, when you exchange back the security for your currency, you need to
assign the original amount to the security account and the balance (profit,
hopefully) to an income account.  That part does not happen automatically,
it must be entered manually as part of the sale transaction.  It is easy
when you buy or sell all of the security at once, but lots come into play
when you have multiple purchases or sales.  The general idea is to match
the correct value (cost) to the correct number of shares in the security
account and to end up with zero value in the security account at the same
time that there is zero shares.

That is why we pay our accountants and brokers big bucks.

Hope that helps.

David C

On Wed, Apr 27, 2016 at 10:02 AM, hppweu <hppweu at frontier.com> wrote:

> David & David,
>
> Thanks for your replies.  I have seen that statement made in other
> threads, that "GnuCash does not automatically calculate your net capital
> gains".  I thought that I understood was being said,and always told myself
> that I was not asking GC to calculate my gain.  I tell GC what the gain is
> through the split transaction, when I enter the Profit and the Cap Gain.
> So, there must be so aspect of the stock transaction that I am not
> understanding.
>
> I think that I completely understand the concept of stock lots.  When I
> sell, I can go online to my brokerage account and get a detailed realized
> gain/ loss, which lists each date of purchase, sale, quantity, cost basis,
> proceeds, etc. Which in my case details the dividends that I reinvest to
> purchase additional partial shares.
>
> I do not understand the "Lots" functionality in GC and don't find it
> covered in the help files.  But I don't 'think' that I need to use it,
> since all of my sales are FIFO.
>
> As I said earlier, I tried to break things down, and work with a simple
> transaction.  I tried to follow the example of the sale of the Amazon stock
> from the Tutorial and Concepts Guide. In one place they use  Profit = $1525
> and in another they use $1600.  Is there an error in that example or am
> missing something?
>
> Thanks so much for your help,
> Pam
>
>
> On Wednesday, April 27, 2016 9:36 AM, David T. <sunfish62 at yahoo.com>
> wrote:
>
>  David C.,
>
> While your comments are true in general, I have found in recent
> experiments that the Scrub Lots feature can provide accurate gains data,
> and at the least provide a good point from which to build.
>
> The situation I have found that results in accurate gains being entered is
> if there is a sale of an entire mutual fund holding for which there is no
> commission charged. In this situation, the result is a gain transaction
> that matches my brokerage statement on gains.
>
> I have hesitated to try the feature on more complex situations (e.g.,
> stocks which have multiple lots, stocks which have changed their basis due
> to splits or spinoffs, etc.), since I receive gains information from my
> brokerage. It is easier overall for me to manually enter the gains
> information based on what the brokerage experts tell me, so that’s what I
> do.
>
> Cheers,
> David T.
>
>
> > On Apr 24, 2016, at 11:40 AM, david.carlson.417 at gmail.com wrote:
> >
> >    Pam,
> > You have found out that GnuCash does not automatically calculate your
> net capital gains that you with your brokers help must report to your
> taxing authorities.
> > The main reason for this is that there is not a "one size fits all"
> formula to calculate that.  To do it accurately you need to be tracking
> 'lots' to determine whether the gain or loss is short term or long term
> according to the instructions that you gave to your broker before the sale
> as well as knowing the exact rules where you live.
> > Many of us use a separate spreadsheet to make those calculations or rely
> on our broker and/or accountant for those numbers.
> > I use the method that results in a correct trial balance within GnuCash
> but I think some users use the other method.
> > David C
> >
> >
> > Sent from my LG G Pad 7.0 LTE, an AT&T 4G LTE tablet
> >
> >
> >
> > ------ Original message------From: hppweuDate: Fri, Apr 22, 2016 12:06
> PMTo: gnucash-user at gnucash.org;Subject:Help with transactions for sale of
> stock
> > The problem I am having is with entering stock transactions so that the
> debit & credits are equal on the trial balance report and the capital gain
> matches what is reported. on my brokerage statements.I am new to this list,
> but have been using GC for about 1 1/2 yrs. I have read all of the
> documentation and have searched this list for a similar thread.  I started
> my books at the beginning of last year, entering all of my personal
> finances, including all transactions from my brokerage account.  All of my
> gains, losses, cost basis, etc. match my brokerage statements.  The problem
> is that the debit and credit are not equal on my trial balance report. In
> order to check that my methodology was not faulty, I started with a new
> file and followed the the examples in Chapter 8 - Investments, in the
> tutorial and concepts guide.  In stepping through it very carefully, I have
> found that there is an inconsistency in the: Example - Sale of stock with
> profit.  The text in the paragraph does not use the same values for profit
> as what is shown in Table 8.2  and and the screenshot immediately after it.
> In the text it states   . . . and finally PROFIT is $1525 (GROSS_SALE -
> TOTALBUY - COMMISSION).In the table and the screenshot, the value $1600 is
> used.The difference between the two values is whether the $75 commission is
> included in the profit calculation.If I follow the example using a profit
> of $1,525, I get the following results:    The Trial Balance report shows
> the debit total = $13,675.24 and credit total = $13,600.24 (a difference of
> $75)    The Advanced Portfolio report shows a Realized Gain = $1,525 and
> Total Return = $1,525    The Income:Cap Gain (Long):AMZN = $1,525When I
> follow the example using a profit of $1600, I get the following results:
> The Trial Balance report shows the debit total = credit total    The
> Advanced Portfolio report shows a Realized Gain = $1,525 and Total Return =
> $1,525    The Income:Cap Gain (Long):AMZN = $1,600So if I include the
> commission expense in my profit calculation, my Income:Cap Gain (Long):AMZN
> account will agree with what gets reported by my brokerage statement and
> with what is on the advanced portfolio report, BUT my trial balance report
> WILL NOT balance.And if don't include the commission in my profit
> calculation, my Income:Cap Gain (Long):AMZN account WILL NOT agree with
> what gets reported by my brokerage statement and with what is on the
> advanced portfolio report, but my trail balance report will balance.Could
> anyone offer advice about what I am thinking or doing wrong?Thanks in
> advance,Pam_______________________________________________gnucash-user
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