How to account for increases in value of equities

architul's Avatar

architul

21 Feb, 2020 07:58 PM

I have an brokerage account with a bank that holds my stocks and bonds, plus some cash. Every month I receive a statement that shows dividends and interest received, fees charged, and "Change in Equity Value". Let's suppose the stocks rose in value. When I transfer that statement information into the account I have opened (I chose equity account type), I have to make a compensating entry in some other account. Now if the stock went up, my net worth went up. But if I record a debit in a balancing account, when Moneydance calculates my net worth, it will show no increase because of the debit in the balancing account.

What am I doing wrong and how do I fix it? I don't want to record the stocks, bonds and cash, only the total for the account.

  1. 1 Posted by dwg on 21 Feb, 2020 08:24 PM

    dwg's Avatar

    I'm a fellow user.

    There are a number of ways of handling this.

    The first way modifies your current method slightly. Instead of using a balancing account, create a category and use that for the balancing entries.

    I have a situation that is similar in some ways, I have funds where it is impossible to get the entries in an electronic form that is suitable for loading into financial software, and it is far too much work to handle it by hand (it comprises 20 odd funds) so I handle it at the total level.

    I decided however to handle it as an investment, its neater and allows you to see changes in value better. My initial investment was entered using price of 1.00 per unit so the total number of units was my initial investment.

    I've created a spreadsheet that gives me the unit price whenever I need it. I enter the current value and it gives me a price per unit that I enter as a new price. If I buy more units I enter the current value just before the purchase and use the price generated as the buy price for my new investment, the same sort of thing with sales.

    I thus derive data that enables the investment to be handled like shares.

    I did raise a suggestion some time ago that Moneydance be extended to work like another program I used some time ago. In it when you have funds it takes an "Add" Acton to be an increase in value and a "Remove" action to be a decrease in value, thus you only enter the change in value each time.

    I'm generally happy with the approach I'm taking, there are some slight rounding errors (in the cents) but as the total fund value is only an approximation at any particular date given different funds update their prices at different times it is satisfactory.

  2. 2 Posted by architul on 21 Feb, 2020 09:24 PM

    architul's Avatar

    Thanks dwg. But doesn't this still leave the balancing entry included in
    the accounting of net worth? Overall, nothing has been added - just moved
    from category to category, no? I remain puzzled!

  3. 3 Posted by dwg on 21 Feb, 2020 09:40 PM

    dwg's Avatar

    I'm a fellow user.

    Your investment is in an account. It is only account balances that are included in Net Worth. If you use a category for the adjustment entries then that side of the transaction is not included in the Net Worth calculation. If you run an Income and Expense report it can be included in that but I would exclude that category from any such reporting.

    Account balances are included in Net Worth calculations
    Category balances are included in Income and Expense calculations

  4. 4 Posted by architul on 21 Feb, 2020 09:43 PM

    architul's Avatar

    Thanks so much!

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