[GNC] Investments: Bank, Asset or Equity?

[David Cousens]

Investments are always assets otherwise they are not investments. You retain
ownership and expect  a return from that ownership either in the form of
dividends or capital gains. Stocks are investments and hence Assets.

A bank type account is a sub-type of asset accounts i as Christopher pointed
out. Having the subtype allows certain procedures which are unique to bank
account and not other assets to be implemented in Gnucash and work
correctly. 

Brokerage accounts act like bank accounts which is why they are of the
subtype.

Equity is a measure of your net worth and in double entry accounting it is
maintained automatically the transaction recording process as expressed in a
rearrangement of what is called the accounting equation which all
transactions in double entry accounting must comply with.

Equity + (Income - Expenses) = Assets - Liabilities = Current net worth.

Normally the only time you make transactions to equity are when you create a
new book where you have existing assets and liabilities with balance values
carried forward from your previous books (or just their existing values if
you have not accounted for them previously) or when you close the temporary
equity account (Income and Expenses) to Equity during a closing procedure.
In business accounting payment of taxes is often recorded  as a transaction
between a bank asset account and a temporary Summary Profit/Loss Account in
Equity which is then generally closed to a permanent Equity account.  

GnuCash does not require a formal closing of these accounts to Equity as
described above for report generation, but the procedure exists and can be
performed if it is required by legislation in your jurisdiction (some do
still).



-----
David Cousens
--
Sent from: http://gnucash.1415818.n4.nabble.com/GnuCash-User-f1415819.html