I already read all the suggested posts about this issue but still need help in figuring out what to do.
I am running version 24.6.17.1665
The simplest question is how only display investments realized gain or loss in Profit Loss Statement - it doesn’t make sense that unrealized gain & loss is calculated in PL Statement as it will contribute to tax calculation.
I tried 2 different ways to try avoiding this issue, but none works as it will either eliminate both unrealized and realized or combine them.
My understanding is that capital gain/loss only calculated once you enter market price, if it isn’t entered then the realized capital gain isn’t shown in PL statements.
Is there a way to add it in the PL statement?
I read that Control account can be used - but I can’t figure out how
I know that I can generate Reports for realized capital gain/loss - shouldn’t it be shown in PL statement though?
Unrealised capital gains (an estimate of the money your business would hypothetically make if it had sold the the investment a some nominated time) is calculated in current versions of Manager if you enter a Market price.
This income is not available to your business (as you didn’t actually sell the investment) so is not taxed (in any jurisdiction I’m aware of). Manager does create a Profit and loss account Investment Gains (Losses)' for this unrealised gain. In settings Chart of Accountsyou need to relabel itInvestment Unrealised Gains (Losses)‘, create a New Total called Taxable income, and move the `Investment Unrealised Gains (Losses)’ account below this total.
Manager creates a Balance sheet account labelled Investment when you create an investment. This initially shows the “at cost” purchase cost of your investments. In the current version of Manager when you make a Market price entry the unrealised gain is allow added to this account obscuring the “at cost”. There is no current work around for this limitation, which is why I would like the user to be able to specify a custom control account for the “Investment accumulated revaluation” Minimize Capital Gains - #16 by Patch (as well as allowing users to separate investments into different groups).
Calculation of realised gains is not explicitly supported by the current version of Manager (the profit/loss calculated when a business actually sells an investment). This actual income typically contributes to a business taxable income. It can readily be manually supported in Manager by creating a Profit and loss account “Investment realised gain (loss)”. This account will contain taxable in come so must be placed in the COA above the “Taxable income” total. Then when an investment is sold create a line in the receipt for each purchase lot being sold, with the line reproducing the purchase unit price and quantity (sold in this transaction). Then allocate any residual amount to the “Investment realised gain (loss)” account.
Investments in Manager work exactly like multi-currency accounts. They are revaluated based on the market price. And the difference between the real balance and revaluated balance is posted to Investment gains (losses) account.
Now, this account will typically represent both realized and unrealized gains (losses).
To get realized gains figure, you can go to Reports tab and generate Realized investment gains (losses) report.
This report can be suplementary report to your profit & loss statement to show the portion of your investment gains that has been realized. Or you can make a journal entry to transfer realized gains into its own account on profit & loss statement.
The concept is exactly the same as with foreign currency accounts.
Thanks. Now I know what to do.
Foreign currencies is actually fine using the current setting in Manager as it only has slight differences than the realized gain/loss.
I guess I can put it in a different report as tax is calculated differently anyway for capital gain.
Actually with Manager’s current implementation the easiest is just not entering any market prices. That way the Manager file just contains the actual accounting data, real transaction data is then visible, and can readily be audited.
Unrealised gains can then be manually added if desired for historical comparisons, or investment brokers reporting used instead to monitor investment performance.
In all businesses actual business profits realised from actual transactions is what determines cash flow and taxable income.
Unrealised profits (loss) does not affect cash flow or taxable income. It is sometimes useful to estimate to monitor an investment performance and net business valuation. It is however always treated differently to the actual profit (loss) from actual transactions.
As a result mixing realised and unrealised gains at primary data entry severely compromises an accounting systems function. However I agree combining them at a higher level makes perfect sense as that shows an asset’s book value.
Self managed super funds are an unusual company as they have a legislated requirement to distribute 100% of their realised profits as well as unrealised gains to members. Distribution of unrealised gains is not required for all other businesses.
And that same argument I made for Forex gains/losses which is also not satisfactory. However, what I learned is that Manager provides data that you can select to manually fill in your tax forms and as long as you can remove these unrealized gains/losses from the P&L then one can cope but hoped really for better.
I do not have any significant business activity in another jurisdiction / country so I’m not really in a position to comment on the practicality of using Managers foreign currency support vs creating a separate Manager business for each jurisdiction where significant business activity is conducted (enable accurate reporting to the foreign tax authority) then using journal entries to transfer summary data to the business head office jurisdiction.
Getting back on topic, the issue is whether Managers approach helps or hinders the actual accounting task a user has to do.
To look at this from another aspect.
Realised gains are an exact physical amount. It only depends on real transactions which have actually occurred.
Unrealised gains in contrast are always an approximation. The sale never occurred, if it did it would have changed the market. Unrealised gains for a lightly traded publicly listed company are more of an approximation, unrealised gains for privately traded shares or a directly held asset are very approximate.
What Manager is currently doing is replacing an exact accounting amount (Investment at cost) with an approximate amount (Estimated prior market value). Doing so makes it far more difficult to manage the actual financial transaction and detect errors in their accounting records.
I appreciate calculation of Market Value is easy if given a market unit price. In contrast calculation of actual realised gain is more difficult, particularly if multiple lots are bought & sold of different amounts at different times. However to track taxable income from investments the actual profit from actual sales has to be calculated.
Manager replacing the actual at cost price with a market estimate is a simple program fix but doing so makes tracking actual transactions more difficult. The resultant changes to the profit & loss accounts is even more worrisome. The difference between the exact at cost amount and an estimated market price is declared as income which is then mixed with real costs and income from actual bank account deposits and withdrawals.
The current approach requires the user to undo Manager obscuration of the accounting data then calculate the actual transaction profit themselves. A far better solution would be for Manager to keep these very different concepts/amounts separate, and not to obscure the actual transaction data.
It is true. I don’t enter market price for stocks anymore.
Once I sold my stocks, I just created a journal entry to move the profit/loss amount to “Realized Capital Gain/Loss” (created manually)
I think the previous version of Manager did it like this - when they have the Investment Revaluation option.
Anyway, my problem is solved. Just need an additional action.
Hi I’m a new user interested in using the Investments tab. In a post from Lubos it is suggested that a Journal entry could be made to the Investment Gains (Losses) account. However, when I try to post anything directly to this account the item goes to Suspense account.
I know that account is automatically generated by the system but my question is will the account accept direct postings, or only automatically generated entries?
This is my first question, please excuse if my question is not in acceptable detail for the forum
You need to create a new account first in COA. I created “Realized Capital Gain” and created a journal entry to move the capital gain amount from investment to that account.
It works for me. You can calculate the capital gain amount manually or you can look it up in the report. My investments are mostly stocks, so if I sold all my stocks, I looked it up in the report. However, if my stocks were bought in different prices and aren’t sold all, I calculated the capital gain manually.
Thanks for reply and for reply from Patch. I will study contents closely as I am on a learning curve for best use of Manager. I am UK based so cost averaging for tax purposes is fine for me and I am not immediately thinking to use a separate Realized Gains account in the COA.
The specific transaction giving rise to my query is that I received a refund from my broker of overcharged brokerage fees on a share sale which was completed in a prior finalised tax year.
That refund will have tax consequences in the current year so I decided to post the receipt directly to the “Investment Gains (Losses) account which is the system generated account.
However, the system did not accept the receipt into that account- instead it posted it to Suspense account. I then tried a Journal entry to transfer it from Suspense to the Investment Gains (Losses) account. The system again let me input the entries, BUT still left the amount in Suspense.
So it seems the system won’t accept Receipts or Journal entries into the Investment Gains (Losses ) account. But from your replies it seems the system should accept such postings.
I can find a work around to handle my problem but at this early learning stage, I am trying to get to grips with the underlying way the system works. I’ll keep trying to get the Investment Gains (Losses) account to accept a direct posting if you say it should.
Many thanks for your time taken responding to my question.
Your tax authority will charge you tax on this amount but not on unrealsied capital gain. As a result you will have to source this data to fill out your tax return.
The excess charge is an asset which you could post to the investment asset account then post the receipt to the same account when received. But I’m sure there are other valid ways of doing it.
Posting it to a system calculated unrealsied capital gain account is not going to work.
It is more the mechanics of how the Manager programmme is designed to work that was interesting me at the minute.
I am trying to figure out if the system generated account, Investment Gains (Losses), will accept direct postings. Or if it will only accept postings generated by the system.
Regards my own prior year transaction, I’ll set up a dedicated account on the COA to keep track of it.
The system (unrealised) investment gains / losses account is valuable, not to post to but, as it is currently the only place in Manager you can see and drill down on actual purchases costs. It contains the information that should be in the investment tab.