A newbie Q - Buying back liability at a discount

[Suresh Bazaj]

You are correct on both points.

 

The first line of the split (decrease liability) is in the left column, the other two are in the right column.

 

Thanks for enlightening me on GNUcash J.

 

Suresh

 

From: Buddha Buck [mailto:blaisepascal at gmail.com] 
Sent: Tuesday, May 10, 2016 3:40 PM
To: Suresh Bazaj; gnucash-user at gnucash.org
Cc: Lewis Balentine
Subject: Re: A newbie Q - Buying back liability at a discount

 

The "non-traditional" GnuCash labels can get confusing when dealing with splits. The credit column is labeled "increase" in liability accounts, but may be labeled as 'decrease' or 'withdrawal' in asset accounts. As such, I prefer to use the traditional names when talking about splits. Regardless of label, the left column is 'debit', and the right column is 'credit'. 

In your entry, the first line of the split (decrease liability) is in the left column, the other two are in the right column, correct? 

And it's 'enlightened one', I believe, not 'wise' :-) 

 

On Tue, May 10, 2016, 18:28 Suresh Bazaj <suresh at bazaj.org> wrote:

Hello Buddha (The wise one :),

        Thanks for the quick response. Though I get confused (just as Lewis)
with the traditional accounting terminology,    fortunately the default
column labels in GNUcash are Increase & Decrease. So, I avoid the whole
credit/debit terminology.

        I entered it as a split transaction in the Liability account:
-       The first entry decreases the liability by the full $1,500
-       The second entry is for $1,300 increase in ST Capital Gain
-       The third entry is for $200 in the checking account. It shows as
increase in the Liability account and as decease in the checking account.

        I don't really understand the meaning of $200 shown as increase in
the Liability account, but as long it shows correctly in the checking
account, I am happy :).

Best,

Suresh

-----Original Message-----
From: gnucash-user
[mailto:gnucash-user-bounces+suresh <mailto:gnucash-user-bounces%2Bsuresh> =bazaj.org at gnucash.org] On Behalf Of
Lewis Balentine
Sent: Tuesday, May 10, 2016 2:16 PM
To: gnucash-user at gnucash.org
Subject: Re: A newbie Q - Buying back liability at a discount

 >> You would (using traditional accounting labels) credit Checking by $200,
credit ST Capital Gain income by $1300, and debit the Liability by $1500. <<

...  debit Checking by $200 ??

On 05/10/2016 04:03 PM, Buddha Buck wrote:
> On Tue, May 10, 2016 at 4:33 PM Suresh Bazaj <suresh at bazaj.org> wrote:
>
>> Hello,
>> 1.     At the beginning of year, there is a $1,500 Liability entry for a
>> PUT
>> sold for $1,500 in prior year. There is a corresponding entry for
>> $1,500 in the Checking account where the $1,500 was deposited.
>>
>>
>>
>> 2.     I bought back the PUT for $200 in March, thereby getting rid of
the
>> Liability for a net profit of $1,300 (ST Capital Gain).
>>
>>
>>
>> 3.     I enter the $200 in the Checking account as a decrease. What do I
>> enter in the Transfer column, such that the Liability is zeroed and
>> the
>> $1,300 shows up as ST Capital Gain income?
>>
> I am unfamiliar with the mechanics of buying and selling options. I
> trust your explanation of what your CPA says is accurate, and am
> answering as if it were.
>
>
>> Is this an example of some type of split Transaction?
>>
> Yes. You would (using traditional accounting labels) credit Checking
> by $200, credit ST Capital Gain income by $1300, and debit the
> Liability by $1500. This would be done as a split transaction.
>
>
>
>>
>>
>> Thanks,
>>
>>
>>
>> Suresh
>>
>>
>>
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