[GNC] Should i care about Unrealized Losses/Gain in Balance Sheet ?

[David Cousens]

Long,

In GnuCash reports the Unrealized Gains are simply a calculated quantity. I
personally don't track my invetments in GnuCash because they are mainly long
term secure securities so I am not that sure what is reported in the Balance
Sheets.

I was really outlining the traditional pen and paper accounting procedure
for doing this as nothing is hidden in the calculations by the program.
There has been some discussion in the forum about the way the Unrealized
gains are calculated and the GnuCash Concepts and Tutorial Guide Ch11
(https://www.gnucash.org/docs/v3/C/gnucash-guide/capgain_concepts1.html)
.Section 11.4.2 deals specifically with how to convert the unrealized gains
to realized gains when you sell an asset. I also find it  a little bit hard
to follow as the transactions are not set out in Dr and Cr format. 

There are three cases dealt with in the guide where your:   
1   cost + unrealized gain = sale price
2   cost + unrealized gain > sale price
3  cost + unrealized gain = sale price
 
In my opinion the headings for 2 and 3 are misleading as 2 is not an
underestimate of the unrealized gain but the unrealized gain is an
overestimate of the actual gain and similarly in 3   the unrealized gain
value is an underestimnate of the actual gain.
Table 11.1 shows the transactions ( in a from which I find a little unclear
from an accounting perspective) for the first case for a sale price (130000)
= cost(100000)+unrealized gain(30000). In the form they would appear in the
registers they are respectively
                                                                             
Dr                   Cr
Income:Unrealized Gains                                        30000   
Income:Realized Gains                                                               
30000

Assets:Fixed Assets:Degas:Cost                                                
100000
Assets:Current Assets:Savings Account                  100000

Assets:Fixed Assets:Degas:Unrealized Gains                               
30000
Assets:Current Assets:Savings Account                   30000

In the second case Table 11.2 where the cost +unrealized gain (130000
overestimates the sale price 12000 the required transactions are:
                                                                             
Dr                   Cr
Income:Unrealized Gains                                        20000   
Income:Realized Gains                                                               
20000

Assets:Fixed Assets:Degas:Cost                                                
100000
Assets:Current Assets:Savings Account                  100000

Assets:Fixed Assets:Degas:Unrealized Gains                               
20000
Assets:Current Assets:Savings Account                   20000

Assets:Fixed Assets:Degas:Unrealized Gains                              
10000                          
Income:Unrealized Gains                                       10000

the last transaction is the adjustment of the Unrealized Gains to the value
of the actual gain in the sale.

the last case table 11.3 where the sale price (150000) is greater than the
cost(100000) + the unrealized gain value the transactions will be:
                                                                             
Dr                   Cr
Income:Unrealized Gains                                        50000   
Income:Realized Gains                                                               
50000

Assets:Fixed Assets:Degas:Cost                                                
100000
Assets:Current Assets:Savings Account                  100000

Assets:Fixed Assets:Degas:Unrealized Gains                               
50000
Assets:Current Assets:Savings Account                   50000

Assets:Fixed Assets:Degas:Unrealized Gains            20000                         
Income:Unrealized Gains                                                          
20000

In the case of your transfer when you thansfer the USD to thw VND account
provided the price in the database at the time matches the conversion rate
the bank gives you then your unrealized gain + cost =sale price and you will
need to create a transaction of the form to transfer your loss:
                                                         Dr                
Cr
Income:Unrealized Gains and Losses                        1100d
Income :Realized Gains and Losses      1100d

plus the entries for the transfer of the money from USD to VND.

The debit and credit are reversed from the example in Table 11.1 above
because it was a gain in table 11.1 and you have incurred a loss.  The
realized gains and losses should now appear in your Income Statement report
and the Balance Sheet will show a value of 0.

David



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David Cousens
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