Assets and asset sub-accounts

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21 Sep, 2020 09:00 PM

I'm modelling my house equity in the following way, I've modified the figures for the sake of example:
(the mortgage and the moving costs are sub-accounts of the House account)

Asset: House initial value £100000
|->Asset: Interest Only Mortgage. initial value -£40000
|->Asset: Moving Costs. initial value -£3000

The house market value is £100,000, the interest only mortgage is £40000 and the moving costs are projected costs in the case of releasing equity from the house by moving to another property. I am using asset sub-accounts for the following reasons:

* The main reason is so that the net value for the house of £57000 (market value - mortgage - moving costs) is displayed in the account summary panel against the House Account which gives a clear equity value for the property.

* I can lookup the house value on Zoopla and easily update the market value causing the net value to update automatically.

* The net worth report shows the subtotal for the house (the net value).

However, the Asset Allocation report and chart does not take into account the negative balances in the Mortgage and Moving Costs sub-accounts. As a result, the asset allocation report and graph is wrong as it shows assets of £100,000 instead of £57000.

I could use a negative opening balance on the house account to take care of the mortgage and the moving costs and forego the subaccounts, but I'd prefer to see the components split out in the account summary and report pages.

Perhaps I've misunderstood the purpose of subaccounts, but unfortunately there is scant information in the knowledge base to explain practical applications of this feature.

Can someone explain the rationale behind why the asset report isn't accounting for the negative balances of the sub-accounts?


Update: I'm not using the Loan Account for the mortgage as the principal is not being paid down. I'm not using the Liability Account because I can't associate this directly with the House Asset Account (ie I can't have a Liability sub-account under an Asset Account).

  1. 1 Posted by dwg on 21 Sep, 2020 09:42 PM

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    I'm a fellow user.

    As the balances in the sub accounts are negative they are not an asset but rather a liability. The Asset Allocation report does not know how to deal with this, it is not looking to calculate net figures. If all the accounts had positive balance it would handle these as they are understood.

    If instead you use the Account Balances report and restrict what accounts are in the report you should get your desired result. You could save this as a memorized report and run it whenever required.

  2. 2 Posted by mark on 21 Sep, 2020 09:56 PM

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    Thanks for replying @dwg. Indeed, I also think the report doesn't seem to know what to do with the numbers. I'm of the opinion that the asset report should take into account the negative asset values for consistency. The net worth report, the overall summary page and the asset accounts themselves allow for negative values. In fact, there doesn't need to be any specific handling for negative values as a straight summation of all asset balances would be sufficient. There appears to be code that is explicitly excluding assets with a negative balance, but only in certain circumstances!

    If the asset report/graph can't handle negative asset balances then I think MoneyDance should disallow negative balances against asset accounts and sub-accounts.

    As it stands, some reports/graphs take into account negative value 'assets' and others don't, which can't be good. If I could tie a liability directly to an asset this would be better, but it's not supported.

    Update: the consequence of using a liability for the mortgage is that the asset report remains out of whack because there is nothing configurable to tell MoneyDance that the liability is offsetting an asset's value.

  3. 3 Posted by dwg on 21 Sep, 2020 10:19 PM

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    Reports that are expect to handle both Asset and Liability amounts, like the Net Worth report should work correctly.

    It appears that the Asset reports are designed to work with asset accounts that have positive balances. It suggests that a different way of deciding what accounts to use in the report perhaps should be investigated, but is it then really an asset report? I think many would say it is not.

    In relation to mixing Asset and Liability accounts. That would give an equity position and in your standard accounting that is not how it is shown, unless you create an equity report. It is shown as the value of the assets on that side of the balance sheet and the value of the loan on the liability side.

    Using a negative asset works to a degree. We can see a net figure in many cases, but it is really embedding what might be considered as a report into the data and I doubt that the developer of the Asset report had that in mind when the report was created. structure since it would turn an Asset report into an Equity report.

    The Account Balances report has the capability of creating an equity report with the setup you have. Even if you had separate Asset and Liability accounts it could also do it if you limited the report to only those accounts involving the asset.

  4. 4 Posted by mark on 21 Sep, 2020 10:43 PM

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    I see what you're saying there dwg. I guess what I'm really looking for is an asset allocation chart applied to net worth. eg for a net worth of 70k, where 57000 (81%) is property using the example above and 13000 (18%) is cash, having taken into account the mortgage.

    So that's leading to me think that perhaps it's better for me to model house equity as an investment account with an opening balance of (house purchase price - mortgage), with appreciation/depreciation handled with MiscInc/MiscExp transactions. Would this work?

  5. 5 Posted by dwg on 22 Sep, 2020 01:53 AM

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    MiscInc and MiscExp transactions do not affect the value of an asset. These as they indicate are Income and Expense items which are in a different part of the chart of accounts.

    To change the value of an asset in an Investment account you need to change the price of the asset. You cannot just use the cash value of an account, that is just cash not an investment so you need to create a security for the house.

    For an example of one way to reflect this say an asset has an initial value of 60000. You enter this as a price of 60000 and 1 share, suppose the value increases by 1000, you enter a new price value using the date this value is for and a price of 61000.

  6. 6 Posted by mark on 23 Sep, 2020 01:38 PM

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    Thanks for your explanations dwg. I've changed to use your latest suggestion which gives me what I need.

  7. mark closed this discussion on 23 Sep, 2020 10:19 PM.

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