Accounting for capital gain

nsjeremiah's Avatar

nsjeremiah

02 Aug, 2020 06:30 AM

How do I capture the capital gain from the sale as an income.

I ca see the Capital Gain when I do an investment report, but the capital gain is not reflected in my income and expenses report.

Samson

  1. 1 Posted by dwg on 03 Aug, 2020 05:05 AM

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    I'm a fellow user.

    Capital gains are a calculated value, in the simplest sense sale price - buy price, the Income and Expense reports are reporting data based on categories that transactions have been assigned to, so there is a disconnect there. There is no report that can meld these different items together.

    You can obviously use the two reports together, if you want to capture all data in the one report, it is necessary to enter an additional transaction into a register to reflect the capital gain, that is you have to pass a transaction through the account that also passes the amount through suitable categories.

    I generally use suitable categories for both sides of the transactions in order to not have to use any accounts.

    For example to put through capital gain that I want reflected in the I & E reports I use two categories and Expense one Tax:Investment reporting and an Income category Capital Gains:Gross.

    I use the Investment Reporting category for the value in the Transfer field and Capital Gains: Gross in the category file, It is the capital gains field I am using in my reporting.

  2. 2 Posted by Dick on 08 Aug, 2020 04:17 PM

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    Good you provide a little more detail on what you are doing. Perhaps an example?

    The part I'm not understanding is the Capitol Gains in the I & E report. Don't you always need an account?

    Dick

  3. 3 Posted by dwg on 08 Aug, 2020 09:44 PM

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    In setup and general usage Moneydance makes a distinction between Accounts and Categories, this works well for Personal finance as it creates a clear cut distinction that is readily understood. Moneydance though is built on accounting principles and in effect a category is really just type of account.

    Moneydance uses the distinction to create reports like the Income and Expense reports, but we can use the underlying fact that they are both really accounts to post transactions in accounts that do not affect their balance but do result in transactions being reported in I&E type reports.

    As to a simple example of a capital gain. Suppose you have a long term Capital Gain. For an Income category you may have Capital Gains:Long. So a category of Capital Gains and a sub category of Long.

    On the expense side I have a category of Taxation Reporting:Investments. I have no interest in the data in this category it is just used for balance entries to satisfy accounting rules.

    In the reports I want an indication of what Investment the capital gain relates to so I pass it through the applicable Investment account and use the appropriate security.

    As I do not want a value in the Investment account I use a pass through transaction type so I use the action of DivXfr. The category I choose is Capital Gains:Long and the transfer account Taxation Reporting;Investments.

    The result is I have a capital gains transaction passing though through the account that I can see and shows the value, but that does not affect the account balance. The transaction however results in an item appearing in the I&E reports because we have recorded it against a category. It is a method that suits personal finance reporting.

    In an accounting system you would be passing somewhat similar entries as your investment would be at book value and you have a gap between that (cost basis) and the sale value and you would have to create transactions between appropriate accounts to show the profit.

  4. 4 Posted by Dick on 09 Aug, 2020 01:03 PM

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    I will give it a try.

    Thanks for the help. I really appreciate it.

    Dick

  5. 5 Posted by nsjeremiah on 09 Aug, 2020 04:32 PM

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    Thanks - I will try this out.

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