Equalisation payments and Accumulation Units

Stuart Beesley (Mr Toolbox)'s Avatar

Stuart Beesley (Mr Toolbox)

22 Jun, 2018 03:57 PM

I am really struggling with MoneyDance and two types of investments.

1/ Fund Equalisation payments in Income paid out funds
I understand that these payments are really a return of capital. As such every Eql payment should also reduce the cost basis. I cannot find a way to do this in MD. What I think we need is a new Action type called 'Eql' for equalisation payments. This would add funds into the cash account, and also at the same time adjust the cost basis. I've tried all variations of Div, DivReinvest, MiscInc, MiscExp with negative numbers and also in the fees field. No combination seems to work. Any help?

2/ Dividends, and Equalisation payments within Accumulation funds.
Related to the above, things get more complicated with Accumulation funds.
a) Equalisation payments here still reduce the cost basis, but no funds or real money is returned (it's effectively in a higher fund price)
b) Dividends reinvested buying 0 shares with the dividend amount. This half works, but I don't think the system likes the 0 shares. Some reports work and some dont.

HELP? Has anyone tackled this and found an answer?

  1. 1 Posted by dwg on 22 Jun, 2018 09:43 PM

    dwg's Avatar

    I'm a fellow user.

    The standard action type for a transaction that reduces the cost basis is a RoC transation i.e. Return of Capital, with a negative amount effectively being a capital call. Quicken created this action type many years ago and is defined in its QIF specification.

    Alas Moneydance does not have such an action type, I know I requested it back around 2012 and other before me as well as others since.

    About all that sort of works at the moment is a sale of 0 units (shares) with a $ amount, BUT this stops you from using lots. The support suggestion of selling all the shares at cost basis and doing buy transactions at the new cost price, can create an enormous number of transactions if this is a regular occurrence and is not a practical suggestion IMO

  2. 2 Posted by Stuart Beesley ... on 23 Jun, 2018 06:15 AM

    Stuart Beesley (Mr Toolbox)'s Avatar

    Thanks, I had kind’a worked that work, but then the capital gains report doesn’t pick that up. I’ll speak to support about that.
    Any idea for a ROC on an accumulation account?

    Thanks

  3. 3 Posted by dwg on 23 Jun, 2018 07:32 AM

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    I do not understand an equalization payment that does not involve money, It is normally used due to the timing of buying an investment so unit holders all receive the same amount but for the recent purchasers part of it is a RoC and part is a dividend.

    If you mean you are automatically reinvesting the funds the fact that no monies are physically received is not relevant, you are deemed to have received the funds, and thus record the income amount as appropriate, whether as dividend or a return of capital, and the funds are used to purchase additional units in the fund.

    With funds I am familiar with the unit price is a calculation based on the net asset value of the fund and the number of units on issue.

  4. 4 Posted by Stuart Beesley ... on 23 Jun, 2018 09:06 AM

    Stuart Beesley (Mr Toolbox)'s Avatar

    Hi. The funds I hold are called Accumulation funds. Yes this means that dividends are reinvested. They don’t buy more units, but in effect the market price is increased by the dividend amount. Normal dividends are find using DivReinvest. However equalisation payments on these accumulation funds are still theoretical returns of capital, but no money passes back. Somehow these amounts are also factored into the market price. However, the cost basis for the units held does have to be reduced by the amount of the theoretical equalisation payment.

    Regards
     
    Stuart

  5. 5 Posted by dwg on 23 Jun, 2018 11:40 AM

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    Sorry but I cannot envisage how they are getting that sort of outcome.

  6. 6 Posted by Stuart Beesley ... on 23 Jun, 2018 06:57 PM

    Stuart Beesley (Mr Toolbox)'s Avatar

    Hi, OK thanks. On a normal type of fund, if I use a sell 0 with the ROC amount, then it will put the funds in my account, and it will reduce the cost basis - so all good (apart from the fact that the CG report seems to lose this -cost). But I also want an entry against an expense account so I can see the amount in reports…. Did you get a work around for this? Thanks

  7. 7 Posted by dwg on 23 Jun, 2018 10:07 PM

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    A RoC is a reduction in the cost base of an assets, it is not an expense hence even if Moneydance did have such a function I would not expect it to be categorised in an expense account.

    The only way I can think of to get it in an expense report would be to enter some category to category transactions, But I'm not seeing the reasoning behind having such an entry in an expense report.

  8. 8 Posted by Stuart Beesley ... on 24 Jun, 2018 05:59 AM

    Stuart Beesley (Mr Toolbox)'s Avatar

    Thanks. I guess you are correct. I just like to have them recorded so that they appear on my annual MD tax report so I can double check things. It’s like Capital Gains. I like to see them so I remember to record them (even though I know I should and can run the CG report).

    Regards Stuart

  9. 9 Posted by dwg on 24 Jun, 2018 07:45 AM

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    I have funds that although I receive distributions for the distributions do not reflect the entries I need for taxation reporting, that data comes in an annual statement. I use a mechanism that allows for this data to appear in my yearly taxation reports but does not impact any account balances.

    What I have done is created an Expense category called Taxation reporting, on the Income side I have created multiple categories to cover what I need to report on, the Income categories I have marked them as being taxation related.

    I then make entries in the investment account that relates to the security in question, I use the taxation reporting category in the transfer field and the relevant category in the category field, I use the DivXfr action type as that gives the action type I am looking for. In Moneydance it is limiting to think that action types only relate to the names they have, better to think of the transaction entries they create.

    Recording entries like this will allow you to report on them in the I & E reports but importantly will not impact the balance in any account.

  10. 10 Posted by Stuart Beesley ... on 24 Jun, 2018 10:13 AM

    Stuart Beesley (Mr Toolbox)'s Avatar

    Thanks. That’s really useful. I keep trying to do it keeping account balances correct.
    - Do I assume your ‘taxation’ category is just a junk/dumping ground and you never refer to it?
    - also i assume you use DivXfr to taxation when you don’t want balances changed and just div when you do? Again just ignoring the ‘taxation’ balance?

    I have seen before some entries which seem purely to be between expense categories and not hitting accounts. I’ve never been sure if this is a valid way of doing things or even how you then manage such entries.

    Regards Stuart

  11. 11 Posted by dwg on 24 Jun, 2018 10:09 PM

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    I do not use the taxation category in any reporting it is there to satisfy the rules of double entry accounting which Moneydance uses as a base.

    There are a number of ways I could do the transaction. I could have done it as a direct category to category transaction but I wanted the Investment account name to be included in the reporting so I pass the transaction through the Investment account's register. DivXfr is an action type that does this as it is really two actions in one - a Div transaction and a Xfr Transaction. I could have done the same thing using these two separate action types or indeed other combinations like a MisInc and a MisExp transaction, but I prefer to just have a single transaction for it.

    What you see describes as account in Moneydance are fundamentally Assets and Liabilities, so a bank account is an Asset and credit card a liability etc. fundamentally however what each of them is, is a transaction register, categories are just transaction registers as well, just defined in a special way to suit personal financial management.

    In a set of accounting books you would see transaction registers for both accounts and categories with no difference is definition or operation. In accounting what would happen is that the Income and expense items would roll up into a profit and loss statement, in personal finance they roll up into Income & Expense statements. The items that roll up to a Balance sheet in accounting in personal finance roll up into account balance statements and net worth.

    So what you see as category to category transfers in Moneydance is quite valid in Accounting, whether the Moneydance developers were aware of facilitating such transactions when the software was designed is another matter.

    What is recommended with Moneydance is that you generally interact with categories via an account, since most of the time you will be doing account to category or account to account transactions, it is absolutely possible to interact directly with the category registers, but unless you totally understand what is happening and some of the subtle differences that can arise I would suggest not doing so.

    FWIW I have used a category register like an account register, but that is because I wanted to create some accrual accounting type entries to get transactions recorded in certain time periods for reporting purposes when the physical transaction occurred outside the period.

  12. System closed this discussion on 23 Sep, 2018 10:10 PM.

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