[GNC] Asset accounts: cost, or value?

[Christopher Lam]

I can illustrate an example where costs etc are derived from my book.

When I purchase a house at $100,000, using a $20,000 deposit and $83,000
mortgage. Purchase costs are $3,000 - includes insurance, buyer's agent
fees etc.

The Balance line describes Asset:Settlement Running Balance.

Deposit
Asset:Settlement +20,000
Asset:Bank -20,000
Balance 20,000

Mortgage drawn
Asset:Settlement +83,000
Liability:Mortgage -83,000
Balance 103,000

House Purchase
Asset:Settlement -100,000
Asset:Fixed:House +100,000
Balance 3,000

Purchase Costs
Asset:Settlement -3,000
Expense:Stamp Duty 1,000
Expense:Buyer's Agent 1,000
Expense:Title Insurance 500
Expense:Building Insurance 500
Balance = 0

I chose to input each component as a separate transaction because they had
different dates (e.g. deposit sent before exchange of contracts).
Alternatively they could all be written as a multi-split transaction.
Selling will be a similar setup.

On Wed, 2 Sep 2020 at 15:16, Marcus Winston <marcus at thechocolatehouse.net>
wrote:

> Well, yes, it isn't necessarily a gnucash question. But pen and ink are
> a bit cumbersome, and so I use gnucash.
>
> Let me illustrate, perhaps it will help to identify whether I'm
> fundamentally doing it wrong, or just have the wrong accounts.
>
> In the assets:fixed assets:house account, I have (I'm making up numbers
> to make things simple):
>
> purchase price of house: +$100,000, balance $100,000
>
> costs to purchase: +$1000, balance $101,000
>
> costs to sell: +$2000, balance $102,000
>
> capital gains: $20,000, balance $122,000
>
>
> What I'm attempting to do is see the cost or value of the house (or,
> that's what I thought it would do) in the assets:fixed assets:house
> account.  The purchase price is, of course, fine. The costs to purchase
> add to the basis, which is what I want to do in order to easily
> see/calculate (eventually) capital gains (for tax-related purposes). I
> add the selling costs before capital gains because, when I add the
> capital gains, then I get to the actual selling price of the house,
> which is convenient. It might be wrong from an accounting perspective,
> but I'm just a "regular person", not an accountant. I'm trying to figure
> out how to use GnuCash to track all this stuff.  What I see in the other
> accounts tells me I am probably doing it wrong. The "costs to purchase"
> account is an expense. But that account has a -$1000 balance, and the
> "costs to sell" account (also under Expenses) has a -$2000 balance. The
> capital gains is the only thing that's right, because that's an income
> account.
>
> The fundamental question is, should I be trying to use the assets:fixed
> assets:house account to track this stuff? What I see in there has me
> thinking that account tracks my actual costs, but when I add the capital
> gains, it appears to reflect the value of the house, not the cost.
> Hence, my original question: is the "house" account intended to track
> the value, or the cost, of the house?
>
> MW
>
>
> On 9/2/20 6:53 AM, Michael or Penny Novack wrote:
> > On 9/2/2020 8:28 AM, Marcus Winston wrote:
> >> 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
> >
> > This isn't a gnucash question per se (you would have exactly the same
> > question were we back in the days of pen and ink on paper accounting)
> >
> > When these transactions occurred you may have entered them wrongly <<
> > BTW, maybe it is being in different jurisdictions, but you are listing
> > things like "title insurance" and "conveyance fees" as SELLER costs.
> > In my experience, it is the buyer who pays for those particular
> > things. >>
> >
> > But back to the other side of those transactions. What I suspect is
> > that you entered them incorrectly with the other side as expenses, not
> > changes to the basis.
> >
> > Michael D Novack
> >
> >
> > _______________________________________________
> > gnucash-user mailing list
> > gnucash-user at gnucash.org
> > To update your subscription preferences or to unsubscribe:
> > https://lists.gnucash.org/mailman/listinfo/gnucash-user
> > If you are using Nabble or Gmane, please see
> > https://wiki.gnucash.org/wiki/Mailing_Lists for more information.
> > -----
> > Please remember to CC this list on all your replies.
> > You can do this by using Reply-To-List or Reply-All.
> _______________________________________________
> gnucash-user mailing list
> gnucash-user at gnucash.org
> To update your subscription preferences or to unsubscribe:
> https://lists.gnucash.org/mailman/listinfo/gnucash-user
> If you are using Nabble or Gmane, please see
> https://wiki.gnucash.org/wiki/Mailing_Lists for more information.
> -----
> Please remember to CC this list on all your replies.
> You can do this by using Reply-To-List or Reply-All.
>