First I explain what I seek. I say what I was doing. Then what I am doing differently.
What I seek:
The old way worked. I believe the new way will work, but be simpler for me. I hope by opening this up to critique, I may either get some confirmation from others that the new way is a good way to go, or I may get one or more alternative ideas on setting up these books.
I am tracking stock brokerate accounts in which I trade securities. Inventory accounts work for tracking the number of each security I have. I can get income and loss reports on the securities when I buy and sell (of course, not necessarily in that order (example: short sales sell the security short then later buy the security to cover the short).
The old way:
I had a separate business accounting books for each Schwab stock brokerage account. And then I had the Main business accounting books (Call it Main). Main has an Asset account for each of the other set of accounts. So Main pulls all the separate accounts together. The net worth account of each stock brokerage accounting books corresponded with its asset account in Main. The balance of the asset account in Main always had to match the balance of the stock brokerage net worth account. (I forgot the term for the account in Main.)
The new way:
Here is a picture of what I am setting up now. We talk only about one stock brokerage account. But keep in mind, I could add other stock brokerage accounts. I explain after the picture.
For a stock brokerage account, I have an asset group, “Schwab investment account” in the picture.
Then I have (1) “Schwab Cash (Margin)”. This is a Manager Accounting control account. And it has one Manager Accounting bank account. A debit balance (positive asset balance) means I have cash. A credit balance (a negative asset balance) means that I have a loan from the stock brokerage. This kind of loan is called margin. And I have bought stocks on margin. I will have such a control and bank account, i.e. a cash/margin account, for each stock brokerage account.
And then I have (2) a “Schwab Securities” account. This is an Inventory account. If I have more stock brokerage accounts, I will have a separate inventory account for each stock brokerage account.
Some Expected Advangates of the New way:
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The old way required adjusting entries whenever I go from holding some cash to having some margin (a loan), and vice versa. The new way won’t require such adjusting entries because the cash and margin accounts are now one account.
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Having an asset group for each stock brokerage account should let me see about the same thing on the account summary page that I saw in each separate set of books, except simpler. I see the cash or margin and the book value of all the stocks. The value of the account group (the new way) corresponds to the net worth of the old separate books.
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I see all the stock brokerage accounts in one place, Main, without any effort to update the accounts in Main to reflect the net worth of the individual sets of books for each brokerage account.
I am thinking that if I need to track investment income from other income (such as sales of merchandise), I can use Manager Accounting tracking codes.
The only reason I am using control accounts, one for each cash (margin) account, is that I can place control accounts anywhere on the balance sheet. And I have all the features of the Manager bank account type.
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I have benefited greatly in the past from Tut’s, Brucanna’s, and Lubos’s remarks, and other’s remarks.
Comments? Critiques?