[GNC] Tracking capital gains, commissions and the Trial Balance report

[Chris Grinton]

You could consider using a contra expense account to reverse the effect of
the expense and apply it to the cost base of the asset purchase? Then you
can still report on the Expense:Commissions account (*without* the
including contra account in the report) to show how much you're paying in
commissions, while also having the asset's cost base accurately include the
cost of the commission.

For example:

Assets:Investments:Brokerage Account:Stock:XYZ        1  share * $100 =
$100 (DR)
Assets:Investments:Brokerage Account:Stock:XYZ
       $   5 (DR)
Expenses:Commissions
                       $   5 (DR)
Expenses:Commissions:less applied to asset cost base
                             $    5 (CR)
Assets:Investments:Brokerage Account
                                       $105 (CR)

On Tue, 21 Dec 2021 at 13:35, Daniel Torstenson <dtorstenson21 at gmail.com>
wrote:

> Hi,
>
> I've been looking into tracking my capital gains and commissions for a
> brokerage account, and I'm running into an issue that I see others have run
> into. Namely, I'd like to account for my commissions and also keep track of
> my capital gains, as my brokerage reports them (and as the IRS expects
> them).
>
>  I found a few threads on this topic, but didn't really see a good
> resolution.
>
> https://lists.gnucash.org/pipermail/gnucash-user/2016-April/065058.html
> https://lists.gnucash.org/pipermail/gnucash-user/2017-February/069173.html
> https://bugs.gnucash.org/show_bug.cgi?id=778455#c4
>
> The problem, as has been pointed out, is that in a double-entry accounting
> system, you can only account for expenses once. Either you count
> commissions as an expense, or you count them as a lowered capital gain. If
> you do both, you're double counting and your book is out of balance.
>
> You can force GnuCash to do it by tweaking the following the instructions
> for manual calculation of capital gains
>
>
> https://lists.gnucash.org/docs/C/gnucash-guide/invest-sell1.html#invest-sell-man
>
> You simply enter the "net profit" instead of the "gross profit" for the
> capital gains in that example. I gather some people do that, but it's
> wrong, and when you run a Trial Balance report, you'll see the credits
> don't equal the debits.
>
> In the bug report above, John Ralls suggests a solution that I didn't
> completely understand. I have a method that's inspired by that comment that
> seems to work for me, but I'm not an accountant and I'm wondering what the
> "standard" method is. In other words, what do the accountants at, say
> Berkshire Hathaway or any other firm with a trading desk do?
>
> I attached a snapshot of the transactions for a fictitious XYZ stock. I
> simply break up the "Capital Gains" into two subaccounts: "Capital
> Gains:Net Capital Gains" and "Capital Gains:Commissions". When I do this,
> the Trial Balance report checks out as desired.
>
> But it seems a little funny to me to have both a commissions expense
> account and a commissions income account (Capital Gains:Commissions), so
> I'm wondering if there's a more standard way of doing this.
>
> Thanks!
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