[GNC] Asset accounts: cost, or value?

Marcus Winston marcus at thechocolatehouse.net
Wed Sep 2 08:28:46 EDT 2020


OK, Thanks. So the "balance" in the asset account would reflect the cost 
of the asset, not its value. That's fine, and is what I concluded also.

Next question: When I sell the house, I'm adding the costs to sell the 
house (title insurance, reconveyance fees, etc) to the cost of the house 
itself. In other words, this will increase the bottom line on the fixed 
asset "House" account. For two-column accounting, where does that money 
come from (what's the other account)? I tried using an equity account, 
but then I end up with a positive equity value on the house after I sell 
it, and that doesn't make sense (I think I should have zero equity in 
the house once it's sold).

MW

On 9/1/20 10:38 PM, Stan Brown wrote:
> On 2020-09-01 19:49, Marcus Winston wrote:
>> I had thought that the Assets:Fixed assets:House would reflect the value of
>> the house. But after putting the purchase price of the house, and then
>> adding the costs to purchase (recording fees, appraisal, etc), I conclude
>> that the House account actually reflects the total cost of the house, and
>> not necessarily its value. First question: is that a correct view of the
>> Assets:Fixed assets:House1 account?
> Any tracking of value that you might do would be mere speculation. Even
> an appraisal is no indication of how much your house is really worth:
> both when I moved earlier this year both houses' appraisals were about
> 20% different from the selling price.
>
> Valuing assets on a balance sheet at somebody's guess of what they're
> worth, known as "writing to market", is part of shady accounting
> practices and, if I'm not mistaken, partly responsible for the real
> estate crash of 2008-2011. Don't do it!
>
> And of course for tax purposes, as you indicated, you _have_ to work
> from actual costs, not from guesses about value. Keeping your books on a
> cost basis will make that less difficult when you make out your tax returns.
>


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