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

[Daniel Torstenson]

Ahh, interesting. I like that idea. I was not aware of contra accounts.
Thanks.

On Mon, Dec 20, 2021 at 8:00 PM Chris Grinton <cgrinton at gmail.com> wrote:

> 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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>