[GNC] Stock account type "child account" under Equity account type "parent account".

[David Cousens]

Jason,

"trades in its own stock"    It is usually illegal for a company to hold its
own shares as assets of the company (except as Treasury stock which does not
have the rights of a shareholder
https://en.wikipedia.org/wiki/Treasury_stock). This is the case in
Australian and UK law
http://www.takeovers.gov.au/content/Resources/cslrc/cslrc_discussion_paper_no_5.aspx. 

US law position is illustrated here
https://scholar.smu.edu/cgi/viewcontent.cgi?article=3793&context=smulr. and
is less clear cut.

This is distinct from issuing stock or a stock split to lower the market
value of the shares held by shareholders by issuing more shares in a
proportional manner.

AFAIK the stock split procedures described in GnuCash are implemented purely
from the point of view of the owner of the shares who wishes to record that
a company in which he owns shares has undertaken a stock split and he is
recording the effect of the stock split on those shares that he  he owns. 

I don't think this procedure however handles the accounting for a stock
split from perspective ofthe company who issues the stock split to its
shareholders. Derek will correct me if I am wrong on that. 

That was covered in outline in one of the articles I posted earlier. (In
practice you may have to account for costs associated with the stock
exchange requirements, issue of the securities etc. as well)  GnuCash can
certainly handle recording this from an accounting perspective, but its
business features don't extend to any automation of or calculations for the
process. All entries would be manual.

If you are seriously operating a company that is publicly floated or going
to be, you may need to look more closely at what your accounting needs will
be and take professional advice as to appropriate software. This will
particularly the case if you have significant payroll and/or inventory or
cost management requirements. GnuCash has no capability in these areas at
the moment and is unlikely to have in the near future. If you have a CFO in
mind, it would be wise to consult him/her about such decisions as well.

David Cousens





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David Cousens
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