Investments

This chapter explains how to manage your investments with GnuCash. Most people have an investment plan, whether its just putting money into a CD account, investing through a company sponsored plan at your workplace or buying and selling stocks and bonds through a brokerage. GnuCash gives you tools to help you manage these investments such as the Price Editor which allows you to record changes in the prices of stocks you own.

Basic Concepts

An investment is something that you purchase in the hopes of generating income, or that you hope to sell in the future for more than you paid. Using this simple definition, many things could be considered investments: the house you live in, a valuable painting, stocks in publicly traded companies, your savings account at the bank, or a certificate of deposit. These many types of investments will be discussed in this chapter in terms of how to track them using GnuCash.

Terminology

Before discussing investments specifically, it will be helpful to present a glossary of investment terminology. The terms presented below represent some of the basic concepts of investing. It is a good idea to become familiar with these terms, or at least, refer back to this list if you encounter an unfamiliar word in the later sections.

Capital gains

The difference between the purchase and selling prices of an investment. If the selling price is lower than the purchase price, this is called a capital loss. Also known as realized gain/loss.

Commission

The fee you pay to a broker to buy or sell securities.

Common stock

A security that represents a certain fractional ownership of a company. This is what you buy when you “buy stock” in a company on the open market. This is also sometimes known as capital stock.

Compounding

The concept that the reinvested interest can later earn interest of its own (interest on interest). This is often referred to as compound interest.

Dividends

Dividends are cash payments a company makes to shareholders. The amount of this payment is usually determined as some amount of the profits of the company. Note that not all common stocks give dividends.

Equities

Equities are investments in which the investor becomes part (or whole) owner in something. This includes common stock in a company, or real estate.

Interest

What a borrower pays a lender for the use of their money. Normally, this is expressed in terms of a percentage of the principal per year. For example, a savings account with 1% interest (you are the lender, the bank is the borrower) will pay you $1 for every $100 you keep there per year.

Liquidity

A measure of how easily convertible an investment is to cash. Money in a savings account is very liquid, while money invested in a house has low liquidity because it takes time to sell a house.

Principal

The original amount of money invested or borrowed.

Realized vs Unrealized Gain/Loss

Unrealized gain or loss occurs when you’ve got a change in price of an asset. You realize the gain/loss when you actually sell the asset. See also capital gain/loss.

Return

The total income plus capital gains or losses of an investment. See also Yield.

Risk

The probability that the return on investment is different from what was expected. Investments are often grouped on a scale from low risk (savings account, government bonds) to high risk (common stock, junk bonds). As a general rule of thumb, the higher the risk the higher the possible return.

Shareholder

A shareholder is a person who holds common stock in a company.

Stock split

Occurs when a company offers to issue some additional multiple of shares for each existing stock. For example, a “2 for 1” stock split means that if you own 100 shares of a stock, you will receive an additional 100 at no cost to you. The unit price of the shares will be adjusted so there is no net change in the value, so in this example the price per share will be halved.

Valuation

The process of determining the market value or the price the investment would sell at in a “reasonable time frame”.

Yield

A measure of the amount of money you earn from an investment (IE: how much income you receive from the investment). Typically this is reported as a percentage of the principal amount. Yield does not include capital gains or loses (see Return). Eg: A stock sells for $100 and gives $2 in dividends per year has a yield of 2%.

Types of Investments

Below is presented some of the broad types of investments available, and examples of each type.

  • Interest-bearing account or instrument

    This type of investment usually allows you immediate access to your money, and will typically pay you interest every month based on the amount of money you have deposited. Examples are bank savings accounts (and some interest bearing checking accounts) and cash accounts at your brokerage. This is a very low risk investment, in the US these accounts are often insured against loss, to a specified limit.

    Sometimes an interest bearing investment is time-locked. This type of investment requires you to commit your money to be invested for a given period of time for which you receive a set rate of return. Usually, the longer you commit the higher the interest rates. If you withdraw your money before the maturity date, you will usually have to pay an early withdrawal penalty. This is a relatively lower risk investment. Examples are certificates of deposit or some government bonds. Other types of Bonds may have higher yields based on the higher risks from the quality of the issuer’s “credit rating”.

  • Stocks and Mutual Funds

    This is an investment you make in a company, in which you effectively become a part owner. There is usually no time lock on publicly traded stock, however there may be changes in the tax rates you pay on capital gains depending on how long you hold the stock. Thus, stocks are typically quite liquid, you can access your money relatively quickly. This investment is a higher risk, as you have no guarantee on the future price of a stock.

    A mutual fund is a group investment mechanism in which you can buy into many stocks simultaneously. For example, a “S&P 500 index fund” is a fund which purchases all 500 stocks listed in the Standard and Poor’s index. When you buy a share of this fund, you are really buying a small amount of each of the 500 stocks contained within the fund. Mutual funds are treated exactly like a single stock, both for tax purposes and in accounting.

  • Fixed Assets

    Assets that increase in value over time are another form of investment. Examples include a house, a plot of land, or a valuable painting. This type of investment is very difficult to determine the value of until you sell it. The tax implications of selling these items is varied, depending on the item. For example, you may have tax relief from selling a house if it is your primary residence, but may not receive this tax break on an expensive painting.

    Fixed asset investments are discussed in Capital Gains and Depreciation. Typically, there is not much to do in terms of accounting for fixed asset investments except recording the buying and selling transactions.

Setting Up Accounts

To setup investment accounts in GnuCash you can either use the predefined investment account hierarchy or create your own. The minimum you need to do to track investments is to setup an asset account for each type of investment you own. However, as we have seen in previous chapters, it is usually more logical to create a structured account hierarchy, grouping related investments together. For example, you may want to group all your publicly traded stocks under a parent account named after the brokerage firm you used to buy the stocks.

Note

Regardless of how you setup your account hierarchy, remember that you can always move accounts around later (without losing the work you’ve put into them), so your initial account hierarchy does not have to be perfect.

Using Predefined Investment Accounts

The Investment Accounts option of the New Account Hierarchy Setup assistant will automatically create a basic investment account hierarchy for you. To access the predefined investment accounts hierarchy, you must make sure your GnuCash file is open, switch to the Accounts tab, and choose Actions > New Account Hierarchy. This will run the New Account Hierarchy Setup assistant and allow you to select additional accounts to add to your account hierarchy. Choose the Investment Accounts option (along with any others you are interested in). Assuming only investment accounts were selected, this will create an account hierarchy as shown below.

Tip

You can also run the New Account Hierarchy Setup assistant by creating a new GnuCash file.

Setup Interest Investment

You will probably at least want to add a Bank account to the Assets and probably an Equity:Opening Balances account, as we have done in previous chapters. Don’t forget to save your new account file with a relevant name!

Creating Investment Accounts Manually

If you want to set up your own investment accounts hierarchy, you may of course do so. Investments usually have a number of associated accounts that need to be created: an asset account to track the investment itself; an income account to track dividend transactions; and expense accounts to track investment fees and commissions.

In a typical account structure, security accounts are sub accounts of an asset account representing an account at a brokerage firm. The brokerage account would be denominated in your local currency and it would include sub accounts for each security that you trade there.

Related purchases, sales, income and expense accounts should also be in the same currency as the brokerage account.

The security sub accounts would each be configured to contain units of a single security selected from the master (user defined) security list and they are expected to use the same currency as the brokerage account.

Security prices are kept in a separate area of GnuCash (the Price Database - Tools > Price Editor). This contains prices for individual securities (not security accounts). All prices for an individual security are in a single currency. If a security is traded in multiple currencies, then a separate security and separate accounts should be set up for each currency.

Custom Accounts Example

The following is a somewhat more complicated example of setting up GnuCash to track your investments, which has the advantage that it groups each different investment under the brokerage that deals with the investments. This way it is easier to compare the statements you get from your brokerage with the accounts you have in GnuCash and spot where GnuCash differs from the statement. Assets Investments Brokerage Accounts I*Trade Stocks ACME Corp Money Market Funds I*Trade Municipal Fund Cash My Stockbroker Money Market Funds Active Assets Fund Government Securities Treas Bond xxx Treas Note yyy Mutual Funds Fund A Fund B Cash Income Investments Brokerage Accounts Capital Gains I*Trade My Stockbroker Dividends I*Trade Taxable Non-taxable My Stockbroker Taxable Non-taxable Interest Income I*Trade Taxable Non-taxable My Stockbroker Taxable Non-taxable Expenses Investment Expenses Commissions I*Trade My Stockbroker Management Fees I*Trade My Stockbroker

Tip

There really is no standard way to set up your investment account hierarchy. Play around, try different layouts until you find something which divides your investment accounts into logical groups which make sense to you.

Interest Bearing Accounts

Investments which have a fixed or variable rate of interest are one of the simplest and most common form of investments available. Interest bearing investments include your bank account, a certificate of deposit, or any other kind of investment in which you receive interest from the principal. This section will describe how to handle these kinds of investments in GnuCash.

Account Setup

When you purchase the interest bearing investment, you must create an asset account to record the purchase of the investment, an income account to record earnings from interest, and an expense account to record bank charges. Below is an account layout example, in which you have an interest bearing savings account and a certificate of deposit at your bank.

Assets
   Bank ABC
      CD
      Savings
Expenses
   Bank ABC
      Charges
Income
   Interest Income
      CD
      Savings

As usual, this account hierarchy is simply presented as an example, you should create your accounts in a form which best matches your actual situation.

Example

Now let’s populate these accounts with real numbers. Let’s assume that you start with $10000 in your bank account, which pays 1% interest and you buy a $5000 certificate of deposit with a 6 month maturity date and a 2% yield. Clearly, it is much better to keep your money in the CD than in the savings account. After the initial purchase, your accounts should look something like this:

Setup Interest Investment

Now, during the course of the next 6 months, you receive monthly bank statements which describe the activity of your account. In our fictional example, we do nothing with the money at this bank, so the only activity is income from interest and bank charges. The monthly bank charges are $2. After 6 months, the register window for the CD and for the savings account should look like these:

Setup Interest Investment

Setup Interest Investment

And this is the main GnuCash account window:

Setup Interest Investment

From the above image of the main GnuCash account window you see a nice summary of what happened to these investments over the 6 months. While the yield on the CD is double that of the savings account, the return on the CD was $50.21 versus $13.03 for the savings account, or almost 4 times more. Why? Because of the pesky $2 bank charges that hit the savings account (which counted for $12 over 6 months).

After this 6 month period, the CD has reached maturity which means you may sell it with no early withdrawal penalty. To do so, simply transfer the $5050.21 from the CD account into the savings account.

Setup Investment Portfolio

Now that you have built an account hierarchy in the previous section, this section will show you how to create and populate the accounts with your investment portfolio. After this initial setup of your portfolio, you may have shares of stock purchased from before you started using GnuCash. For these stocks, follow the instructions in the Entering Preexisting Shares section below. If you have just purchased your stocks, then use the Buying New Shares section.

Setup Accounts for Stocks and Mutual Funds

This section will show you how to add stocks and mutual fund accounts to GnuCash. In this section, we will assume you are using the basic account setup introduced in the previous section, but the principles can be applied to any account hierarchy.

You should have within the top level Asset account, a few levels down, an account entitled Stock. Open the account tree to this level by clicking on the “right facing triangle marker” signs next to the account names until the tree is opened to the depth of the new account. You will need to create a sub-account (of type stock) under the Stock account for every stock you own. Every stock is a separate account. The naming of these stock accounts is usually done using the stock ticker abbreviation, though account names may be anything that is clear to you and other users. So, for example, you could name your accounts AMZN, IBM and NST for your Amazon, IBM and NSTAR stocks respectively. Below is a schematic model of the layout (only showing the Assets sub-accounts).

Assets
   Investments
      Brokerage Accounts
         Bond
         Mutual Funds
         Market Index
         Stock
            AMZN
            IBM
            NST

Note

If you want to track income (dividends/interest/capital gains) on a per-stock or fund basis, you will need to create an Income:Dividends:STOCKSYMBOL, Income:Cap Gain (Long):STOCKSYMBOL, Income:Cap Gain (Short):STOCKSYMBOL and Income:Interest:STOCKSYMBOL account for each stock you own that pays dividends or interest.

Example Stock Account

As an example, let’s assume that you currently own 100 shares of Amazon stock. First, create the stock account AMZN by selecting the Stock account and click on the menu Actions > New Account…. The New Account dialog will appear, follow the steps, in the sequence below to setup your new stock account.

New Account Window

  1. Account Name - Usually, use the stock ticker abbreviation, IE: “AMZN”

  2. Account Code - Optional field, use CUSIP, the newspaper listing symbol, mutual fund family ID or code of your own choosing.

  3. Description - Optional field for detailed description of the commodity/stock. Note this field by default is displayed in the Account tab tree.

  4. Account Type - Select the type of account you are creating from the lower left-hand list.

  5. Parent Account - Select the parent account for the new account from the right hand listing. Expand list of accounts if necessary.

  6. Create the New Security - To use a new stock, you must create the stock as a new commodity

    Note

    Be sure to first select Account Type Stock or Mutual Fund so that the Select… button brings up the list of securites rather than currencies.

    • Select Security/Currency - Click on the Select … button next to the security/currency line. We must change the security from the default (your default currency) to this specific stock. This will bring up the Select Security dialog.

    • Type - Select the exchange where the security/commodity is traded (in this example NASDAQ).

      Select the New button to open the New Security window.

      Select Security Window

    • Create the Security - Click on the New… button and enter the appropriate information for this stock on the new form New Security.

      • The Full name: is “Amazon.com”.

      • The Symbol/abbreviation: is “AMZN”. The symbol is the stock ticker used in your quote source several lines down on the form. Note that different symbols will be utilized on different price sources for the same stock, an example is Ericsson on the Stockholm Exchange is ERIC-B while on Yahoo it is ERRICB.ST

      • The Type: should already be NASDAQ, because this is what was selected in the security selector, but you can change it here, including adding more categories. More information about this can be found in the Help Manual in section 7.7, “Security Editor”.

      • The ISIN, CUSIP or other code is where you can enter some other coding number or text (leave it blank in this example).

      • The Fraction traded should be adjusted to the smallest fraction of this security which can be traded, usually 1/100 or 1/10000.

      • The checkbox “Get Online Quotes”, the quote source and the timezone should be selected to define the sources for updating prices on-line. See Also “Setting Stock Price Automatically”.

        Note

        If the Get Online Quotes button is not highlighted, and it is not tickable, then the Finance::Quote package is not installed. See the section on “Installing Finance::Quote”.

        Below is what this window should look like when finished: New Security Window New Security Window

      • Save Security - Click on the OK button to save this new security, this will close the New Security window and return to the New Account window.

  7. Select the Security - you should now see the newly created security available in the pull down menu for Security/Currency. Select it (it is probably already selected) and click on OK.

  8. Smallest Fraction - Specify the smallest fraction of the security/commodity that is traded.

  9. Notes - Enter any notes or messages related to this security/commodity.

  10. Tax Related - Go to Edit > Tax Report Options to check this box if this account’s transactions will relate to Income Taxes.

  11. Placeholder - Check box if this account is a “Placeholder”, that is it will contain no transactions.

  12. Finished - You should now have been automatically returned to the New Account dialog, with the symbol/abbreviation: line set to “AMZN (Amazon.com)”. Click on OK to save this new stock account.

You have now created the Amazon stock account, your main account should look something like this (notice that there are a few extra accounts here, a bank account, and an equity account):

Setup Current Portfolio

Open the account register window for this AMZN stock account (double click on it). Here you see the Commodity view. This gives you an overview of the transactions in this commodity including the number of units (shares for a stock or mutual fund) bought or sold, the net price per unit, and the total amount. Obviously, we have not bought or sold any shares of AMZN yet, so the register should not contain any transactions.

Buying Shares

Entering Preexisting Shares

The examples in this section use Transaction Journal view.

To register the initial 100 shares of this stock that you purchased previously, on the first (transaction) line, enter the date of the purchase (eg: Jan. 1 2005) and Description (eg: Opening Balance). On the first split line, enter 100 in Shares, delete the (unit) Price (it will be calculated when you Tab out of the split) and enter 2000 in the Buy column.

Note

It is also possible to use GnuCash to calculate Shares or Buy from the other 2 columns but to avoid rounding errors, it is better to automatically calculate Price.

Tab to the second split line, enter transfer from account Equity:Opening Balances. For simplicity, this example assumed there were no commissions on this transaction. Your AMZN Commodity view should now appear like this:

Setup Current Portfolio

Notice that the Balance (last column) is in the units of the commodity (AMZN shares) not in currency units. Thus, the balance is 100 (AMZN units) rather than $2000. This is how it should be.

Buying New Shares

The main difference between setting up a new stock purchase versus the setup for preexisting stocks as described in the previous section is that instead of transferring the money used to purchase the stock from the Equity:Opening Balances account, you transfer from your Assets:Bank ABC or Assets:Brokerage Account account.

Handling Commissions and Fees

For conciseness, this document will refer to the money you pay to a broker for buying and selling securities as Commissions. Government fees may also be payable. Unless otherwise stated, fees are handled in a similar way.

In GnuCash there are 2 alternate ways to handle commissions (for simplicity this document section will refer to these ways as net pricing and gross pricing):

  • Net Pricing: You enter a net price (adjusted by commissions) when buying and selling securities. You do not also record commissions in a specific commissions account in order to later claim it as an expense, as this would be claiming commissions twice. This way is compatible with using Selling Shares with Automatic Calculation of Capital Gain or Loss Using Lots. This results in a slightly misleading price being added to the price database (the effective price you paid) but is not usually of any concern.

OR

Please get professional advice if you are unsure which of these ways are applicable to your jurisdiction.

Example: Buying Shares with Gross Pricing

In this example you will purchase $5000 of IBM stock, with a commission of $100. First step will be to create the stock account for IBM. The existing Expenses:Commission account will be used. If you wish to track commissions to the individual stock level an additional sub-account would be necessary. E.g. Expenses:Commission:IBM.

Now for the transaction, on the first (transaction) line, enter the Date of the purchase (eg: Jan. 3 2005) and Description (eg: Initial IBM Purchase). On the first split line, enter 50 in Shares, delete Price (leave it empty so it will be calculated)), and enter 5000 in Buy. You do not need to fill in the Price column, as it will be calculated for you when you Tab to the next split. The next line in the split transaction will be Expenses:Commissions and fill in Buy ($100). The third line will be to transfer $5100 from account Assets:Bank ABC to balance the transaction. Your IBM Commodity view should now appear like this:

Setup Current Portfolio

Example: Buying Shares with Net Pricing

Repeating the previous example using Net Pricing instead of Gross Pricing, in Transaction Journal view:

Purchase $5000 of IBM stock being 50 Shares for $100.00 each, plus a commission of $100.

Now for the transaction, on the first (transaction) line, enter the Date of the purchase (eg: Jan. 3 2005) and a Description (eg: Initial IBM Purchase). On the first split line, optionally enter more details in Memo, then 50 in Shares, delete anything in Price (so it will be calculated by dividing Buy by Shares when you Tab out of the split), 5100 in Buy (50 * $100.00 + $100). Alternatively use GnuCash to calculate Buy by entering the formula 5000+100 or (50 * 100) + 100 in Buy ( Buy will be calculated when you Tab

out of the column. Use the Tab key as many times as needed to

proceed to the next split.

Do not enter a separate split for Commission as it has already been included in the Buy value. The second split line will be to transfer from Assets:Bank ABC $5100 to balance the transaction. After the splits are all correct, use the Enter

key to save the transaction. Your IBM Commodity view should

now appear like this:

Setup Current Portfolio

Setting Share Price

The value of a commodity, such as a stock, must be explicitly set. The stock accounts track the quantity of stocks you own, but the value of the stock is stored in the Price Editor. The values set in the Price Editor can be updated manually or automatically.

Initial Price Editor Setup

To use the Price Editor to track a stock value, you must initially insert the stock. To do so, open the Price Editor (Tools > Price Editor) and click on Add button. The first time a Commodity/Stock is entered this window will be blank except for the control buttons on the bottom. Select the appropriate Commodity you want to insert into the Price Editor. At this point, you can input the price of the commodity manually. There are 6 fields in the New Commodity window:

Namespace

The exchange market where the security/commodity is traded (in this example NASDAQ)

Security

The name of the commodity, must be chosen from the Select… list

Currency

The currency in which the Price is expressed.

Date

Date that the price is valid

Type

One of: Bid (the market buying price), Ask (the market selling price), Last (the last transaction price), Net Asset Value (mutual fund price per share), or Unknown. Stocks and currencies will usually give their quotes as one of bid, ask or last. Mutual funds are often given as net asset value. For other commodities, simply choose Unknown. This option is for informational purposes only, it is not used by GnuCash.

Price

The price of one unit of this commodity.

As an example of adding the AMZN commodity to the price editor, with an initial value of $40.50 per share.

Price Editor

Click OK when finished. Once you have performed this initial placement of the commodity into the Price Editor, you will not have to do it again, even if you use the same commodity in another account.

Note

If you have online retrieval of quotes activated (see Configuring for Automatic Retrieval of Quotes), you can initialize a commodity without manually making an entry. When you initially add the security in the Security Editor, check Get Online Quotes and save the security. Then, in the Price Editor, click Get Quotes, and the new security will be inserted into the price list with the retrieved price.

Setting Stock Price Manually

If the value of the commodity (stock) changes, you can adjust the value by entering the Price Editor, selecting the commodity, clicking on Edit and entering the new price.

Price Editor

Configuring for Automatic Retrieval of Quotes

If you have more than a couple of commodities, you will tire of having to update their prices constantly. GnuCash has the ability to automatically download the most recent price for your commodities using the Internet. This is accomplished through the Perl module Finance::Quote, which must be installed in order to activate this feature.

To determine if the Perl module Finance::Quote is already installed on your system, type perldoc Finance::Quote in a terminal window and check to see if there is any documentation available. If you see the documentation, then the module is installed, if you do not see the documentation, then it has not been installed.

Installing Finance::Quote

Microsoft Windows:

  • Close GnuCash.

  • Run Install Online Price Retrieval which can be found in the GnuCash “Start” menu entry.

MacOS: You need to have XCode installed. XCode is an optional item from your MacOS distribution DVD. Run the Update Finance Quote app in the GnuCash dmg. You can run it from the dmg or copy it to the same folder to which you copied GnuCash. It will open a Terminal window and run a script for you which will ask lots of questions. Accept the default for each unless you know what you’re doing.

Linux:

  • Close any running GnuCash instances.

  • Locate the folder where GnuCash is installed by searching for gnc-fq-update

  • Change to that directory, open a root shell

  • Run the command gnc-fq-update

This will launch a Perl CPAN update session that will go out onto the internet and install the Finance::Quote module on your system. The gnc-fq-update program is interactive, however, with most systems you should be able to answer “no” to the first question: “Are you ready for manual configuration? [yes]” and the update will continue automatically from that point.

After installation is complete, you should run the “gnc-fq-dump” test program, in the same directory, distributed with GnuCash to test if Finance::Quote is installed and working properly.

Note

If you feel uncomfortable about performing any of these steps, please either email the GnuCash-user mailing list (gnucash-user@gnucash.org) for help or come to the GnuCash IRC channel on irc.gnome.org. You can also leave out this step and manually update your stock prices.

Configuring Securities for Online Quotes

With Finance::Quote installed and functioning correctly, you must configure your GnuCash securities to use this feature to obtain updated price information automatically. Whether creating new securities or modifying securities that have already been setup, use the Tools > Security Editor, to edit the security and check the Get Online Quotes box. You will now be able to modify the radio buttons for Type of quote source, the pull-down menus to specify the specific source(s) and The timezone for these quotes. When finished editing, Close the Security Editor to return to the Price Editor and click on the Get Quotes button to update your stock prices on the Internet.

The command gnucash --add-price-quotes $HOME/gnucash-filename can be used to fetch the current prices of your stocks. The file specified $HOME/gnucash-filename will depend on the name and location of your data file. This can be determined by the name displayed in the top frame of the GnuCash window, before the “-”. The file name can also be found under File in the recently opened file list; the first item, numbered 1, is the name of the currently open file.

This can be automated by creating a crontab entry. For example, to update your file every Friday evening (16:00) after the relevant exchange markets close (modify the time accordingly for your time zone), you could add the following to your personal crontab:

0 16 * * 5 gnucash –add-price-quotes $HOME/gnucash-filename > /dev/null 2>&1

Remember that Mutual Fund “prices” are really “Net Asset Value” and require several hours after the exchange closes before being available. If NAVs are downloaded before the current days NAVs are determined, yesterday’s NAVs are retrieved.

Displaying Share Value

The main account window, by default, only shows the quantity of each commodity that you own, under the column heading Total. In the case of stocks, this commodity is the number of shares. Often, however, you will want to see the value of your stocks expressed in terms of some monetary unit. This is easily accomplished by entering the main window, selecting the Accounts tab, by clicking on the Titlebar Options button (the small down pointing arrow on the right side of the main account window titles bar), and selecting the option to display the account total field “Total (USD)”. You will see a new column in the main window entitled Total (USD) that will express the value of all commodities in the report currency.

Viewing Stock Value

The “Price Source” in Reports

Most GnuCash reports have options to set/modify a number of parameters for the report. The Options dialog box is displayed by selecting the report tab then clicking on either the Options icon in the Menubar or selecting Edit > Report Options. Price Source determines how accounts denominated in commodities different from the report currency are converted to the report currency. Depending on the report the selector may appear in either the General, the Commodities, or the Display tab of the Report Options dialog box.

Note

In the example below, the report is a customization of the Average Balance report in the Assets & Liabilities reports submenu.

Determining Stock Price/Currency Exchange Rate Source in Reports Determining the value of a stock commodity or a currency other than the report currency in a report by setting the Price Source option.

  • Weighted Average: Calculates the price by summing the absolute value of the amount and the absolute value of every split in every account denominated in the commodity, excluding those splits with a zero amount, and dividing the sum of values by the sum of amounts to obtain a price. For example, if you had a buy transaction for 200 shares of XYZ for a total of 2000 and a sell of 100 for 1300 the weighted average would be 3300/300 or 11/share.

    Note

    Gain/Loss splits have an amount of 0 and are not included in this calculation.

  • Average Cost: Calculates the price by summing the amounts and values of every split in every account denominated in the commodity, including the zero amount splits. In the example above, with an additional split (either part of the sale transaction or in a separate transaction) booking the gain at 0 shares and a 300 gain, the average cost is 1000/100 (2000 original cost - 1300 proceeds from the sale + 300 gain)/(200 - 100) shares or 10/share.

    Note

    Gain/Loss splits are included in this calculation.

    Note

    This is the only Price Source that will balance the Trial Balance Report and in order for it to balance you must correctly book your gains and losses.

  • Most Recent: Uses the latest price from the price database.

  • Nearest in time: Uses the price nearest in time to the report datethe datum date for time series reports like Assets Over Timefrom the price database.

    Note

    The nearest date isn’t necessarily before the date in question.

An Asset Barchart Report based on the Nearest in time Price Source.

Selling Shares

Entering an investment sale transaction is done in a similar way to entering a buy transaction (see Buying New Shares) except the amount entered in the Shares column is negative and the proceeds of the transaction is entered in the Sell column. The net proceeds from the sale should be transferred from the shares account to your bank or brokerage account.

For information on handling commissions and the use of Net Pricing or Gross Pricing, please see Handling Commissions and Fees.

If you will be recording a capital gain or loss on the sale, please see Capital Gains and Depreciation for more information on this topic.

To use the GnuCashAutomatic Calculation of Capital Gain or Loss Using Lots feature, please see Selling Shares with Automatic Calculation of Capital Gain or Loss Using Lots otherwise continue to the next section.

Selling Shares with Manual Calculation of Capital Gain or Loss

Note

In order for GnuCash to commit the zero-share, zero-price split for account Assets:Stock:SYMBOL to the transaction in the following schemes, you *must* Tab out of that split. If you use the Enter key, GnuCash will convert the split into shares of the commodity.

In the schemes of transaction splits presented below, the following symbols are used:

  • NUM_SHARES: number of shares you are selling

  • COMMISSION: brokerage commissions or fees

  • GROSS_SELL_PRICE: unit price for which you sold the shares, not reduced by COMMISSION

  • NET_SELL_PRICE: unit price for which you sold the shares, reduced by COMMISSION

  • GROSS_BUY_PRICE: unit price for which you bought the shares, not increased by COMMISSION

  • NET_BUY_PRICE: unit price for which you bought the shares, increased by COMMISSION

  • GROSS_BUY: total price for which you bought shares, excluding COMMISSION, equal to NUM_SHARES * GROSS_BUY_PRICE

  • NET_BUY: amount of money for which you bought shares including COMMISSION, equal to GROSS_BUY + COMMISSION.

  • GROSS_SALE: total price for which you sold shares, equal to NUM_SHARES * GROSS_SELL_PRICE

  • NET_SALE: amount of money received from the sale, equal to GROSS_SALE - COMMISSION

  • GROSS_PROFIT: amount of money you made on the sale, not reduced by COMMISSION

  • NET_PROFIT: amount of money you made on the sale, reduced by COMMISSION

There are 2 ways of manually recording the capital gain or loss. The capital gain/loss can be combined with the sale in one transaction or it can be entered in a separate transaction.

Combine the Sale and Capital Gain/Loss in One Transaction

This has the advantage that all parts of the sale event are kept together. This is not compatible with using scrubbing (see Selling Shares with Automatic Calculation of Capital Gain or Loss Using Lots). If you may in future use scrubbing on a specific security, save some work later by entering the capital gain/loss splits in a separate transaction now.

When the capital gain/loss splits are combined with the sale splits in one transaction, there are 2 splits for the security account in the same transaction, so the transaction must be entered with the security register in Auto-Split Ledger or Transaction Journal view. One of the splits for the security account is for the sale and the other is for the capital gain or loss. The security account split for the capital gain or loss must be entered with 0 number of shares and 0 price per share to stop the automatic recalculation of these fields.

Account for the profit or loss as coming from an Income:Capital Gains or Expenses:Capital Loss account.

Combined, Gross Pricing

Combined, Gross Pricing

Account

Number of Shares

Share Price

Total Buy

Total Sell

Assets:Bank ABC

NET_SALE

Assets:S tock:SYMBOL

0

0

G ROSS_PROFIT

(Loss)

Expenses :Commission

COMMISSION

Assets:S tock:SYMBOL

-NUM_SHARES

GROSS _SELL_PRICE

GROSS_SALE

Inc ome:Capital Gains

(Loss)

G ROSS_PROFIT

Combined, Net Pricing

Combined, Net Pricing

Account

Number of Shares

Share Price

Total Buy

Total Sell

Assets:Bank ABC

NET_SALE

Assets:S tock:SYMBOL

0

0

NET_PROFIT

(Loss)

Assets:S tock:SYMBOL

-NUM_SHARES

NET _SELL_PRICE

NET_SALE

Inc ome:Capital Gain

(Loss)

NET_PROFIT

Separate the Capital Gain/Loss Transaction from the Sale Transaction.

This is required if using scrubbing to automatically calculate and create capital gain/loss transactions (otherwise scrubbing will not detect them and will create an incorrectly valued gain/loss transaction).

Separated, Gross Pricing

Separate Transactions, Sale Transaction

Account

Number of Shares

Share Price

Total Buy

Total Sell

Assets:Bank ABC

NET_SALE

Expenses :Commission

COMMISSION

Assets:S tock:SYMBOL

-NUM_SHARES

GROSS _SELL_PRICE

GROSS_SALE

Separate Transactions, Capital Gain/Loss Transaction

Account

Number of Shares

Share Price

Total Buy

Total Sell

Assets:S tock:SYMBOL

0

0

G ROSS_PROFIT

(Loss)

Inc ome:Capital Gain

(Loss)

G ROSS_PROFIT

Separated, Net Pricing

Separate Transactions, Sale Transaction

Account

Number of Shares

Share Price

Total Buy

Total Sell

Assets:Bank ABC

NET_SALE

Assets:S tock:SYMBOL

-NUM_SHARES

NET _SELL_PRICE

NET_SALE

Separate Transactions, Capital Gain/Loss Transaction

Account

Number of Shares

Share Price

Total Buy

Total Sell

Assets:S tock:SYMBOL

0

0

NET_PROFIT

(Loss)

Inc ome:Capital Gain

(Loss)

NET_PROFIT

Examples of Selling Shares with Manually Entry of Capital Gain or Loss

In these examples we will use the AMZN account created in the previous section.

Example: Sale of Shares with Profit, Manual Profit/Loss Calculation, Sale & Profit Combined, Gross Pricing

In this example you bought 100 shares of AMZN for $20 per share, then later sell them all for $36 per share with a commission of $75. In the split transaction scheme above, GROSS_BUY_PRICE is $20 (the original buying price), NUM_SHARES is 100, GROSS_BUY is $2000 (the original buying cost), GROSS_SALE is $3600, and finally GROSS_PROFIT is $1600 (GROSS_SALE - GROSS_BUY).

Pricing

Account

Shares

Price

Buy*

S ell

Assets:Bank ABC

352 5.00

Assets:Brokerage Account:Stock:AMZN

0

0

160 0.00

Expenses:Commission

7 5.00

Assets:Brokerage Account:Stock:AMZN

-100

36.00

360 0.00

Income:Capital Gain (Long Term):AMZN

160 0.00

Selling Shares Example

Note

In the above screenshot, it appears there are 2 transactions for Mar 21st 2006. This is because the register is in Auto-Split Ledger view and there are 2 splits for the register account in the 1 transaction. Transaction Journal view may be clearer. Refer to Simple vs. Split Transactions. As there are 2 splits for the register account in the sale transaction, this transaction must be entered in Auto-Split Ledger or Transaction Journal view. It cannot be entered in Basic Ledger view.

Selling Shares Example

Example: Sale of Shares with Profit, Manual Profit/Loss Calculation, Sale & Profit Combined, Net Pricing

In this example you bought 100 shares of AMZN for $20 per share (including commissions), then later sell them all for $36 per share with a commission of $75. In the split transaction scheme above, NUM_SHARES is 100, NET_BUY_PRICE is $20 (the original buying price), NET_BUY is $2000 (the original buying cost), NET_SELL_PRICE is $35.25 (($3600 - $75) / 100)), GROSS_SALE is $3600, NET_SALE is $3525, and finally NET_PROFIT is $1525 (NET_SALE - NET_BUY).

Pricing

Account

Shares

Price

Buy*

S ell

Assets:Bank ABC

352 5.00

Assets:Brokerage Account:Stock:AMZN

0

0

152 5.00

Assets:Brokerage Account:Stock:AMZN

-100

35.25

352 5.00

Income:Capital Gain (Long Term):AMZN

152 5.00

Selling Shares Example

Example: Sale of Shares with Profit, Manual Profit/Loss Calculation, Sale & Profit Separated, Gross Pricing

You bought 100 shares of AMZN for $20 per share and commissions $20, then later sell them all for $36 per share with a commission of $75. In the split transaction scheme above, GROSS_BUY_PRICE is $20 (the original buying price), NUM_SHARES is 100, GROSS_BUY is $2000 (the original buying cost), GROSS_SALE is $3600, and finally GROSS_PROFIT is $1600 (GROSS_SALE - GROSS_BUY).

Selling Shares Split Scheme, Sale Transaction, Gross Pricing

Account

Shares

Price

Buy*

S ell

Assets:Bank ABC

352 5.00

Expenses:Commission

7 5.00

Assets:Brokerage Account:Stock:AMZN

-100

36.00

360 0.00

Selling Shares Split Scheme, Gain Transaction, Gross Pricing

Account

Shares

Price

Buy*

S ell

Assets:Brokerage Account:Stock:AMZN

0

0

160 0.00

Income:Capital Gain (Long Term):AMZN

160 0.00

Selling Shares Example

Example: Sale of Shares with Profit, Manual Profit/Loss Calculation, Sale & Profit Separated, Net Pricing

You bought 100 shares of AMZN for $20 per share (including commissions), then later sell them all for $36 per share with a commission of $75. In the split transaction scheme above, NUM_SHARES is 100, NET_BUY_PRICE is $20 (the original buying price), NET_BUY is $2000 (the original buying cost), NET_SELL_PRICE is $35.25 (($3600 - $75) / 100)), GROSS_SALE is $3600, NET_SALE is $3525, and finally NET_PROFIT is $1525 (NET_SALE - NET_BUY).

Selling Shares Split Scheme, Sale Transaction, Net Pricing

Account

Shares

Price

Buy*

S ell

Assets:Bank ABC

352 5.00

Assets:Brokerage Account:Stock:AMZN

-100

35.25

352 5.00

Selling Shares Split Scheme, Gain Transaction, Net Pricing

Account

Shares

Price

Buy*

S ell

Assets:Brokerage Account:Stock:AMZN

0

0

152 5.00

Income:Capital Gain (Long Term):AMZN

152 5.00

Selling Shares Example

Selling Shares with Automatic Calculation of Capital Gain or Loss Using Lots

Introduction

Wikipedia includes the following definition of a lot

“a set of goods for sale together in an auction; or a quantity of a financial instrument”.

GnuCash has a built-in lot management facility that can be used to keep track of capital gains or losses resulting from security sales. Buy and sell transactions are put into lots for the purpose of calculating the cost of the sale. More specifically, a lot is used to link particular buy and sell transaction splits. Lots can be automatically or manually created and linked. Capital gain or loss can be automatically calculated and transaction(s) created for the difference between the sale value and the cost of the securities sold. GnuCash refers to this process as scrubbing.

The term scrub is used because security accounts need to be cleaned after sales to ensure the difference between the cost paid for securities, and value received from selling them, is accounted for as capital gain or loss. If the capital gain/loss is not correct, the Trial Balance (Reports > Income & Expense > Trial Balance) bottom line total debits will not balance to total credits.

Note

If you make an error, you can delete the lot(s) and capital gain/loss transaction(s) and retry. Ensure you delete the lot, or at least unlink sale transactions from the lot, before you delete a capital gain/loss transaction. Otherwise, the Lots in Account screen will recreate the capital gain/loss transaction when you select the lot.

If you are not familiar with FIFO, LIFO or Average costing, please see Wikipedia FIFO and LIFO accounting and Average cost method.

If you are not familiar with the difference between GnuCash transactions and splits, please see Simple vs. Split Transactions.

The GnuCash lot management facility can be a useful feature, reducing manual calculation, especially if dividends have been reinvested over years and there are many different costs involved. It can automatically link buy transactions to sell transactions using FIFO cost method and one can manually link specific buy transactions to sell transactions in order to use LIFO. Advanced Portfolio Report basis costs and gains/losses will agree with the costs and gain/loss transactions created by scrubbing if either the FIFO or LIFO cost methods are used.

Lots in Account Window

The Lots in Account SSSS window, where SSSS is a security account, is used to manually or automatically link security transaction splits to lots and create capital gain/loss transactions to account for the difference between the costs of buying a security and the value received by selling it.

To open the Lots in Account window, open the security account register, then select Actions > View Lots.

Selling Shares - Capital Gains - Lots in Account window

Selling Shares - Capital Gains - Lots in Account window

Refer to the Help Manual, Chapter 8 Tools & Assistants, Lots in Account for details of the Lots in Account screen elements.

Procedure Summary

Using the lot management facility for the automatic calculation of capital gain or loss typically follows these steps:

  1. Record the sale transaction using Net Pricing (but stop short of entering the Capital Gain transaction as it will be created by scrubbing). See Example: Sale of Shares with Profit, Manual Profit/Loss Calculation, Sale & Profit Separated, Net Pricing.

  2. Manual Lot Creation and Linking (Optional depending on cost method)

  3. Automatic Creation of Capital Gain Or Loss Transactions

  4. Change Orphaned Gains-CCC to Gain/Loss Account

  5. Run a Trial Balance report to ensure total debits balance to total credits

Manual Lot Creation and Linking

Before using this feature, ensure you have read Considerations.

This functionality allows the manual linking of specfic buy and sell transactions. It may be used in the case where a user wishes to use a different cost method than the automatic linking method (FIFO). Effectively, if one wishes the cost basis and capital gains in the Advanced Portfolio Report to be consistent with the capital gains transactions created by scrubbing, manual lot creation only needs to be used when using LIFO or “sale of designated lots” (the same thing for securities as far as US personal tax law is concerned). This is because the scrub function can automatically do FIFO linking so there is no need to do it manually and scrubbing cannot be used for average costing.

See Example 1: Manual Lot Creation and Linking.

Automatic Creation of Capital Gain Or Loss Transactions

Note

Do NOT do this unless you are using FIFO or LIFO to cost sales. See Considerations

GnuCash can automatically calculate and create security sale capital gain/loss transactions. Lots are used to link buy transaction splits with sell transaction splits so the correct cost of the securities sold can be determined. GnuCash will use any existing lots, and create new lots for any buy transaction splits not already linked to a lot. Buy and sell transaction splits are linked to lots using FIFO method.

See:

Example 2: Automatic Creation of Capital Gain Or Loss Transactions

Example 3: Automatic Creation of Capital Gain Or Loss Transactions, 2 Sales at Once

Example 4: Automatic Creation of Capital Gain Or Loss Transactions - After a Simple Stock Split

Change Orphaned Gains-CCC to Gain/Loss Account

The capital gain/loss transaction(s) created by scrubbing uses an automatically created generic Orphaned Gains-CCC account (where CCC is the security currency) because GnuCash doesn’t know which capital gain or loss account should be used. After scrubbing, the user should edit the Orphaned Gains-CCC transaction split to re-assign the income account to a more meaningful income (or expense) gain or loss account (e.g. Income:Long Term Capital Gain:IBM).

See Example 5: Changing the Orphaned Gains-CCC to Gain/Loss Account.

Run a Trial Balance

Running a Trial Balance report (Reports > Income & Expense > Trial Balance) after creating capital gain/loss transactions, is a basic check that capital gains/losses are correctly accounting for the difference between the cost paid for securities, and value received from selling them. At the end of the report, total debits should equal total credits.

Tip

A Trial Balance may not balance due to some other problem. To determine if the cause of an imbalance is from incorrectly accounting for capital gain/loss:

If necessary, temporarily change the date of the sell transaction and the capital gain/loss transaction, so they are the only transactions for a particular date, then run the Trial Balance as at the day before. If the Trial Balance is still out by the same amount, it is not the capital gain/loss that is causing the problem.

If you find a prior out of balance Trial Balance, keep running the Trial Balance report with different dates until you find the date it starts being out of balance. Temporarily change the transaction dates for each transaction on the problem date to the following day, then change the dates back to the correct date 1 at a time, running the Trial Balance each time, until you identify the problem transaction. When you change the date of a security sell transaction, you also need to change the date of the corresponding capital gain transaction as it is only the sum of these that will balance in the Trial Balance.

Considerations

There are some points that should be considered before using the lot management facility.

  1. GnuCash implements only the First In/ First Out (FIFO) cost method when automatically linking buy transactions to sell transactions. I.e. The oldest securities are always sold first. The Last In First Out (LIFO) cost method may be used by manually linking the most recent buy security splits to the sell split before scrubbing.

  2. The Advanced Portfolio Report does not use lot information when calculating costs, just the security transaction splits. It calculates the cost basis and gains or losses using the selected Basis calculation method report option (Average, FIFO or LIFO). If one wishes the Advanced Portfolio Report costs and gains/losses to be consistent with the capital gain/loss transactions created by scrubbing, the same cost model must be used in both places.

  3. Scrubbing does not recognize commissions or fees so makes no allowance for them in the calculation of gain or loss. Therefore you must use Net Pricing rather than Gross Pricing if you wish to use scrubbing. See Handling Commissions and Fees.

  4. Scrubbing does not recognize capital gain/loss transaction splits if they have been manually entered as part of the sale transaction. Therefore ensure previous sales are recorded as 2 transactions:

    reduction of the number of shares

    Account

    Tot Shares

    (Unit) Price

    Buy (Debit)

    Sell (Credit)

    Brokerage or Bank

    Debit

    Security

    -NumSold

    SaleUnitPrice

    SaleValue

    Transaction 2 capital gain/loss (loss in this example)

    Account

    Tot Shares

    (Unit) Price

    Buy (Debit)

    Sell (Credit)

    Capital Loss

    Debit

    Security

    0

    0

    Credit

  5. The automatic capital gains calculations can handle straightforward buy, sell, and return of capital transactions but any transaction that affect the number of shares, even simple splits, will cause it to produce wrong answers so those cases must be handled manually.

Example 1: Manual Lot Creation and Linking

Here is an example of selling part of a security holding using the LIFO method. In this example, the most recent buy transaction (dated 01/07/2016, a reinvested dividend), is linked to a lot, along with the sell transaction, and the GnuCash scrub function is used to calculate capital gain or loss and create the capital gain/loss transaction.

  1. Open the security account’s register.

  2. Ensure all previous capital gain/loss transactions are separate transactions to the sell transactions which record the reduction in the number of shares and the value received.

  3. Select Actions > View Lots to open the Lots in Account SSSS window where SSSS is the security account.

  4. Create a new lot using the New Lot button. Initially this lot is not linked to any buy or sell split.

  5. Highlight the new lot in the Lots in This Account panel.

  6. Highlight the buy split (dated 01/07/2016) of the security to be sold in the Splits free panel.

  7. Click the >> button to link the buy split with the highlighted lot. The split moves from the Splits free panel to the Splits in Lot panel.

  8. Repeat the previous 2 steps for any other buy splits that should be included in the lot (in this example, there is only 1 buy split in the sale).

  9. Highlight the sell split in the Splits free panel.

  10. Click the >> button to link the sell split with the highlighted lot.

  11. Check the lot Balance is as expected. I.e. in this example the lot balance should be zero as the number of securities sold in the lot, is matched with the same number of security buys.

  12. Click the Scrub button (NOT the Scrub Account button).

    The Lots in Account window has not changed after using the Scrub button so no example screen image is supplied.

  13. Close the Lots in Account SSSS window and return to the security account register.

  14. Continue to Change Orphaned Gains-CCC to Gain/Loss Account

Example 2: Automatic Creation of Capital Gain Or Loss Transactions

Create the capital gains transaction by following these steps:

  1. Open the security account’s register.

  2. Ensure any previous manually entered capital gain/loss transaction splits have been entered in separate transactions to the the sell transactions.

  3. Select Actions > View Lots to open the Lots in Account SSSS window where SSSS is the security account.

  4. If using LIFO, use the above procedure Manual Lot Creation and Linking to create a lot for each sell transaction, link the lot with the sell transaction and each of the buy transactions that make up the sale.

  5. Click the Scrub Account button which:

    • Creates lots for any buy transactions that are not already linked to a lot and links them to sell transactions splits using the FIFO method. As a transaction split can only be linked to 1 lot, if a sell transaction needs to be linked to multiple lots, the sell transaction split is itself split into multiple subsplits. In the case of multiple subsplits, it is possible to have different splits from the same transaction in both the Splits free and Splits in lot panels.

    • Creates a separate transaction per lot for capital gain/loss.

  6. Continue to Change Orphaned Gains-CCC to Gain/Loss Account

Example 3: Automatic Creation of Capital Gain Or Loss Transactions, 2 Sales at Once

Here is an example of FIFO scrubbing without manual lot creation. In this example, the transactions for 2 sales are scrubbed at once but usually scrubbing would be performed after each sale. One reason for scrubbing 2 sales at once, could be because there were multiple sales on the same day.

Selling Shares - Capital Gains - Register before Scrub Account

Selling Shares - Capital Gains - Register before Scrub Account

  1. Select Actions > View Lots to open the Lots in Account SSSS window where SSSS is the security account.

    Selling Shares - Capital Gains - Lots before Scrub Account

    Selling Shares - Capital Gains - Lots before Scrub Account

  2. Click the Scrub Account button.

    Selling Shares - Capital Gains - Lots after Scrub Account

    Selling Shares - Capital Gains - Lots after Scrub Account

    Note

    After using the Scrub Account button only the last lot is shown, so the above image is after the Lots in Account window has been closed and reopened so all the lots show.

  3. Close the Lots in Account SSSS window and return to the security account register.

    Note

    The security splits in the sell transactions have been split into subsplits, one subsplit per lot, and a capital gain transaction has been created for each security subsplit of each sell transaction.

  4. Continue to Change Orphaned Gains-CCC to Gain/Loss Account

Example 4: Automatic Creation of Capital Gain Or Loss Transactions - After a Simple Stock Split

Here is an example of FIFO scrubbing without manual lot creation/linking, where the Stock Split Assistant has been used for a simple stock split. In this example, 100 shares of security XYZ were bought for $10.00 each, there was a simple 2 for 1 stock split for zero cost (so the holding was then 200 shares @ $5.00 each), then all 200 shares were sold for $6.00 each.

Selling Shares - Capital Gains - Register after Scrub Account

Selling Shares - Capital Gains - Register after Scrub Account

Selling Shares - Capital Gains - Lot 0 after Scrub Account

Selling Shares - Capital Gains - Lot 0 after Scrub Account

Selling Shares - Capital Gains - Lot 1 after Scrub Account

Selling Shares - Capital Gains - Lot 1 after Scrub Account

The above screen shots show that scrubbing created:

2 lots. A separate lot for each buy (it essentially treats the stock split as a buy of 100 for no cost)

2 capital gain transactions (one for each lot) on the date of the sale:

  • Lot 0: 1/7/2009 loss $400 (sale $600 - cost $1000)

  • Lot 1: 1/7/2009 gain $600 (sale $600 - cost $0)

Total gain $200 is correct. Whether the gain is a single long-term one or one each of long-term and short-term or whether there’s even a distinction depends on the user’s tax jurisdiction and the way the split is structured. If the user needs help figuring it out they should consult a professional.

Example 5: Changing the Orphaned Gains-CCC to Gain/Loss Account

  1. Close the Lots in Account SSSS window if open and return to the security account register.

  2. Find each new Realized Gain/Loss transaction in the security account register (they will have the same date as the sell transactions). Edit the Orphaned Gains-CCC transaction split to re-assign the income account to a more meaningful income (or expense) gain or loss account (e.g. Income:Long Term Capital Gain:IBM).

    Tip

    You may like to split the capital gain/loss into taxable and non taxable parts if that is in accord with your tax laws.

Dividends

Some companies or mutual funds pay periodic dividends to shareholders. Dividends are typically given in one of two ways, either they are automatically reinvested into the commodity or they are given as cash. Mutual funds are often setup to automatically reinvest the dividend, while common stock dividends usually pay cash.

Dividends in Cash

If the dividend is presented as cash, you should record the transaction in the asset account that received the money, as income from Income:Dividends. Additionally if you want to tie the cash dividend to a particular stock holding then add a dummy transaction split to the stock account with quantity 0 price 1 value 0.

As an example consider the following; the dividends deposited as cash into the Broker Account with a tie to the stock account.

Example of cash dividend transactions

Note

If you want to track dividends on a per-stock basis, you would need to create an Income:Dividends:STOCKSYMBOL account for each stock you own that pays dividends.

Dividends Re-Invested

If you receive the dividend in the form of an automatic reinvestment, the transaction for this should be handled within the stock or mutual fund account as income from “Income:Dividend” for the appropriate number of reinvested shares. This type of reinvest account is often referred to as a DRIP (Dividend Re-Investment Program).

As an example consider the following purchase of NSTAR (NST) stock with the dividends reinvested into a DRIP Account. Mutual fund re-investments would be the same.

Starting with the purchase of 100 shares on Jan. 3, 2005, all dividends will be reinvested and an account is created to track the dividend to the specific stock. GnuCash simplifies the entry by allowing calculations within the cells of the transaction. If the first dividend is $.29/share, enter $53.28 (purchase price + dividend) in the share Price cell and 100*.29 in the Buy cell. GnuCash will calculate for you the corresponding numer of Shares

Example of dividend reinvestment transactions

Return of Capital

This refers to a transaction where an investment returns capital to the investor and doesn’t have any accounting implications other than reducing the cost basis. The number of shares held is not changed.

A Return of Capital transaction can be entered in the stock register by entering the stock split with

Shares

0

Price

0

Sell

Return of Capital value

The other side of the double entry would usually be a debit to the brokerage bank account.

Example of return of capital transactions

Note

It is not possible to use the Stock Split Assistant to do this type of transaction.

Tip

If you accidentally entered a non-zero price in the stock split, GnuCash may have created an unwanted price database entry which could cause reports to be wrong. Check for and remove such an unwanted entry from the price database using Tools > Price Editor.

Splits and Mergers

Companies may split their stock for many reasons but the most common is that the price has risen higher than management thinks is a reasonable price for many investors. Some of these splits are simple exchanges (eg 2 for 1 or 3 for 2) and some are complex exchanges with cash distributions. Splits may also result in fewer shares if the exchange rate is a reverse split (1 for 3 or .75 for 1).

Simple Stock Split

As an example, our holding of NST stock declared a 2 for 1 stock split effective June 6, 2005. The process for entering this transaction is; select Actions > Stock Split to start the assistant.

An image of the stock split assistant at step 1.

The first screen is an Introduction, select Forward to display the selection of the account and stock for the split. You will need to create an entry for each Account:Stock combination you hold.

An image of the stock split assistant at step 2 - Selection of Account/Stock.

Select the Assets:Investments:DRIPs:NST and click on Forward.

The next screen presents 5 fields in the Stock Splits Details window:

  • Date - Enter the date of the split.

  • Shares - The number of shares increased (or decreased) in the transaction.

    In our example it is a 2 for 1 split so the number of additional shares is the number of shares currently in the register.

  • Description - The Description should give a brief explanation of the transaction.

  • New Price - If desired the new price of the stock, after the split, may be entered.

  • Currency - The currency of the transaction is required. This should be the same as the stock purchase currency.

Click on the Forward button.

An image of the stock split assistant at step 3 - Split Details.

The next screen will be skipped in this example as there was no “Cash in Lieu”.

An image of the stock split assistant at step 4 - Cash in Lieu.

A final Finish screen will give a last option to; Cancel, Back to modify any data entered or Apply to complete the stock split with the data entered.

Example of simple stock split transaction in the stock's register

Moderately Complex Stock Merger

As an example, assume you held AT&T stock during the Nov. 18, 2005 merger of SBC with AT&T. For this example you will have purchased AT&T on April 1, 2005, any dividends will have been paid in cash, therefore not entered into the AT&T stock register.

The conditions of the merger were .77942 share of SBC stock were exchanged for each share of AT&T stock. The merged company continued to use the symbol “T” from AT&T.

AT&T paid a “dividend” of $1.20/share on the transaction date, however this will not appear in the stock account as it was a cash distribution.

The process for entering this transaction is identical to the simple split until the “Details” screen. You will need to create an split entry in each Investment Account:Stock account combination that has shares splitting.

An image of the stock split assistant at step 2.

Select the Assets:Investments:Brokerage Account:Stock:T and click on Forward.

The next screen presents 5 fields in the Stock Splits Details window:

  • Date - Enter the date of the split. Here we’ll enter November 18, 2005.

  • Shares - The number of shares increased (or decreased) in the transaction.

    In our example it is a .77942 for 1 split so the number of shares will decrease from the number of shares currently in the register. You may use GnuCash’s ability to perform calculations on an entry form by entering data directly (E.g. “(.77942*100)-100”) to calculate the decrease in shares from the split.

  • Description - The Description should give a brief explanation of the transaction.

  • New Price - If desired the new price of the stock, after the split, may be entered.

  • Currency - The currency of the transaction is required. This should be the same as the stock purchase currency.

Click on the Forward button.

An image of the stock split assistant at step 3.

The next screen will be skipped in this example as there was no “Cash in Lieu”.

A final “Finish” screen will give a last option to Back to modify any data entered or Apply to complete the stock split with the data entered.

Example of moderate stock split transaction in the stock's register