Prices of commodities can change, affecting the value of assets, be it currencies, stocks or even properties.
How price movements are handled in built-in Prudent reports
In the built-in Prudent reports such as Months in Calendar and the Account list, the approach is to identify these as recognized capital gains or losses.
In traditional accounting, this means that the increase or decrease in value is noted in a "recognized capital gain" account and the equity account.
Prudent reports simplifies this by automatically showing the increased / decreased value of the asset without the need for an entry in either of the above accounts.
Following this basic principle, you can expect the following for example:
- No additional accrued Income, Expenses and Profit will be shown in Calendar as it is only recognized, but not yet realized.
- Net-worth and Cash-Debt figures will change to reflect the recognized value of the underlying assets.
Recognized capital gain or loss in Account list
The Account list shows the overall recognized capital gain or loss for all accounts.
For example, a journal with the following transactions:
2020/04/18 Assets:Shares:AbneyShares 1 SOMST @ $60 Equity:Opening Balances P 2020/04/19 16:17:00 SOMST $68 2020/04/18 Assets:Cash 100 AUD @ $0.64 Equity:Opening Balances P 2020/04/19 16:17:00 AUD $0.63
Results in an account list that looks like the following:
Notice that the $7 capital gain summary results from:
- $8 of gain from Abney Shares due to the rise in price of SOMST shares from $60 to $68
- -$1 loss in cash value as AUD depreciated from $0.64 USD/AUD to $0.63 USD/AUD.
For those interested in the accounting details, see this post on Stack Exchange.