Great Addition to the manager @lubos .
I have Some Suggestions on this: -
Investments should be classified in two categories named Long Term Investments and short term investments.
Long Term Investments should be valued at cost until they are sold.And short term investments should be valued at cost or mkt value whichever is less.
Long Term Investments should be classified in investing activities and short term investments should be the part of cash and cash equivalents. In cash flow statement.
Gains and losses on long term investments should be recorded on sale of investments. And losses on short term investments should be recorded every time whenever it mkt value comes below its cost but gains should be recorded only on sale of investments.
Add Custom Field’s for investments.
Add Ability for attachments.
Please take my suggestions into your consideration.
This could be solved using custom fields. If this country-specific, then relevant custom field could be automatically provided by localization.
It will be possible to have more flexibility how investments could appear on cash flow statement. Right now, they are all financing activities.
There is going to be automatic calculation for gains and losses but you can always make manual entries to make adjustments if required. It’s similar how inventory on hand costing works. Manager will make automatic entries but you are free to make manual adjustments too.
@lubos will the user be able to select a choice account for gains and losses for every investment item/stock? Accounting standards (e.g IFRS) requires Gains and losses of some classes of assets to be recognized in equity and others in the income statement.
Unless I have missed something, it appears there will also be a need for a way to enter a starting balance (or historical cost basis) for an investment. Right now it seems the only method to enter cost is to create a payment to the investment.
This is one small part of why I wrote that your suggestion would not work. In many, possibly most, cases, you do not know whether an investment will be held for a statutory long term or not when you make the investment. That determination comes after the fact.
I believe that one will find this a real rabbit hole for finding a sub-system that accommodates reporting requirements. Besides the question of realized gain/loss short v long term, companies (in the U.S. at least) may also chose accounting methods on either transaction date or settlement date. I ended up writing code (excel VBA) on imported brokerage account data to generate the JE’s I wanted for my own accounting in Manager. Statement reconciliation is also an issue as I am using transaction date accounting and the brokerage statement still shows unsettled sales as equity holdings in the account. Unrealized gains/losses are also subject to different journal entry methods based upon holding considerations. Unrealized gains/losses also need to be adjusted when a security is sold and the gain is realized. I am hopeful that you succeed. It will be a challenge.
Trying to internalize every possible accounting treatment for every possible investment class would be quite a rabbit hole. At best it could be a jack of all trades master of none but even then I don’t think the “all trades” part is possible – not even remotely.
Alternatively it could be a blank page approach where Manager provides all the tools necessary for the users to setup their investment accounts to their satisfaction. I really think that that’s the way to go. But we’ll have to wait and see.
And since many users are using inventory tab to manage their inventory with great deal of success, I think that would be a great place to start.
I would really appreciate if @lubos could throw this into a mega thread just like localizations so users can contribute and help come up with a thorough solution that avoids extraneous tabs and future patch work.
Features that may be considered by @lubos for the Investments tab include:
The choice of classifying unrealized gains or losses under Equity or Income.
Tracking earnings to each investment.
Market values with dates and the option to disable market values.
Accounting for possible adjustments required to the cost of investments for taxation purposes under a sub-account.
Categorizing investments as short term or long term is possibly only relevant to treating them as Current vs Non-Current assets that can be dealt with under the Chart of Accounts.
The volume and term of the investments can also be used to determine if they are investments or
a stock trading business. If it is a stock trading business it is possible more expenses can be assigned to the trading activity but that is outside the scope of Manager.
@Ealfardan you are correct, stock splits are quite common. Perhaps adding a field for the unit cost would facilitate stock splits. You simply adjust the cost per unit and the quantity to achieve that result.