[GNC] Fwd: Double entry directly to Equity

[Bogdan]

Well, actually my question is not an accounting question but rather a
technical one on how to set up and use equity accounts in Gnucash, if at
all possible (I'm a qualified accountant by the way). I took a revaluation
reserve just as an example.

In many accounting frameworks you can find items that affect equity
directly rather than through Profit and Loss / Retained Earnings.

For example, if you account for Property at fair value through P&L (so
called "investment property") you would reflect an unrealized gain in
market value as :

Dr Asset Cr Income (you equity increases because your net income / retained
earnings increase)

However, if you use a revaluation model for the Property and mark it to
market you would do:

Dr Asset Cr Reserve account

A Reserve account is an equity account (as much as Retained Earnings is an
equity account). This gain doesn't go through P&L  and doesn't affect your
income and expenses but it does increase your equity / capital directly
through the reserve account (where it's reflected on the asset side - the
property account or counter-account is beyond the point).

So I guess I am just wondering how to create an equity account in Gnucash.
I used to set up these accounts as sub-accounts in the Trading account but
now when I'm trying to make an entry directly to such a sub-account in
Trading (e.g. Dr Asset Cr Trading) the Trading account changes to Imbalance
automatically. Is there a workaround or is there a way to fix it?

Thanks!

On Sun, May 8, 2022 at 2:39 AM Michael or Penny Novack <
stepbystepfarm at comcast.net> wrote:

>
> > This Investopedia page (
> >
> https://www.investopedia.com/terms/r/revaluationreserves.asp#:~:text=Revaluation%20reserve%20is%20an%20accounting,of%20the%20asset%20has%20changed
> > .) might provide some insights into how to setup revaluation reserves. My
> > reading of this is that the Reserve account is a contra account to the
> asset
> > value and it is recorded against a specific Expense account to account
> for short
> > term variations in the asset value.  Find the section on recording
> revaluation
> > reserves a bit down the page.  Most jurisdictions don't tax unrealized
> gains or
> > give you exemptions for unrealized losses, so you would likely want to
> record it
> > under an Expense account category for non-deductible expenses.
> >
> > You should seek specific accounting advice from a qualified accountant
> for your
> > jurisdiction and specific situation and not rely on this
> >
> > David Cousens
>
> Listen to David.
>
> This is a house. Ordinary expenses fore most repairs are non-deductible.
> But certain "improvements", while also non-deductible at the time, are
> allowed to be added to the basis, and so can reduce capital gains
> when/if the house is sold << and you might not be required to report
> these gains if buying another house for more within a certain amount of
> time >> BUT (and this is why I am not being more specific, though I know
> some of the details) I am NOT "qualified" to give such advice. Seek a
> qualified professional.
>
> Michael D Novack
>
>
>
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