11.3. Account Setup


In the next few sections, unrealized gain accounts are created, and the estimated unrealized gain transactions are recorded there in order for users to understand unrealized gain easily. However, it is not necessary to record unrealized gains unless large corporations like which adopt IFRS in actual accounting. The small enterprise users, who are using GnuCash, should not record unrealized gains. Record into GnuCash only when realized gains are fixed.

As with most accounting practices, there are a number of different ways to setup capital gains accounts. We will present here a general method which should be flexible enough to handle most situations. The first account you will need is an asset Cost account (GnuCash account type Asset), which is simply a place where you record the original purchase of the asset. Usually this purchase is accomplished by a transaction from your bank account.

In order to keep track of the appreciation of the asset, you will need three accounts. The first is an Unrealized Gains asset account in which to collect the sum of all of the appreciation amounts. The Unrealized Gains asset account is balanced by a Unrealized Gains income account, in which all periodic appreciation income is recorded. Finally, another income account is necessary, called a Realized Gains in which you record the actual capital gains upon selling the asset.

Below is a generic account hierarchy for tracking the appreciation of 2 assets, ITEM1 and ITEM2. The Assets:Fixed Assets:ITEM1:Cost accounts are balanced by the Assets:Current Assets:Savings account, the Assets:Fixed Assets:ITEM1:Unrealized Gains accounts are balanced by the Income:Unrealized Gains account (similar for ITEM2).

    -Current Assets
    -Fixed Assets
            -Unrealized Gains
            -Unrealized Gains
    -Realized Gains
    -Unrealized Gains