[GNC] Gnucash-created "closing" entries

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[GNC] Gnucash-created "closing" entries

Stan Brown
> From: David Cousens <[hidden email]>
> Subject: Re: [GNC] Basic Question (I hope) - End of Year Procedure
>
> The easiest way to achieve that would be to manually perform the closing
> transactions rather than use the inbuilt procedure, then they are just
> ordinary transactionsand won't have the KVP pair in them.
>
> For closing transactions, they should always appear after any other
> transaction for the period being closed so that the transferred balances
> represent the true state of the accounts at the end of the period. This was
> why accountants introduced an artificial 13th month into the financial year
> so that all closing transactions were forced to occur fater any other
> transaction that occurred within the year. Any required adjustments to the
> accounts  are also usually carried out before the closing transactions for
> the same reason.
>
> A list of key value pairs is a data structure that is part of each
> transaction record. It allows arbitrary data to be added to the main data
> structure (the transaction) without requiring that structure to be redefined
> throughout the code. Only the code for processing the data in the KVP needs
> to be added to the code base to add features requiring new data not
> previously stored. The facilities for extracting it and adding it are a part
> of the original transaction data structure. The KVP is also used in other
> data structures within GnuCash for the same purpose.


Thanks for your reply. I understand why you would say that the closing entries should be the last transactions, but let me explain why that doesn't work for me. The Gnucash closing entries are only two of about half a dozen closing entries that I have.

I make a distinction between (a) ordinary income and expenses, and (b) several non-routine types of income or expense that I can't plan for. (a) are Income and Expense type accounts, and GC closes them into an Equity account called Ordinary Income Summary. (b) are things like Gain or Loss on Investments, or Legacies, which would dwarf ordinary income and expenses, and they are Equity accounts, not Income or Expenses.

When I "close the books", GC generates two transactions, one summarizing income and one summarizing expenses. Then to have a transaction showing net income, I have to create it manually:

Debit:  Ordinary Income Summary   $500.00
Credit: Ordinary Income Summary   $425.00
Credit: Net Worth                 $ 75.00

Naturally, that transaction must follow the "close the books" transactions, since I don't know gross income and total expenses until after that transaction is created. And then my others:

Debit:  Gain or Loss on Investments: $ XXXX.XX
Credit: Net Worth                    $ XXXX.XX

And so forth, for the other non-ordinary accounts.

I know you suggested that I should create the closing transactions for income and expenses myself, but there are probably 50 accounts, so that seems like a lot of work.

Surely there's a way within the GUI to make the special "closing" transactions into just regular transactions, so that I can enter the half-dozen final closing transactions and have them in the right order.

--
Stan Brown
[hidden email]
https://BrownMath.com
http://OakRoadSystems.com/
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Re: [GNC] Gnucash-created "closing" entries

David Carlson-4
Stan,

You could try using the Close Books function  to create model transactions
then duplicate them to get copies that likely do not contain the odd dates.

David C

On Fri, Dec 28, 2018, 1:37 PM Stan Brown <[hidden email] wrote:

> > From: David Cousens <[hidden email]>
> > Subject: Re: [GNC] Basic Question (I hope) - End of Year Procedure
> >
> > The easiest way to achieve that would be to manually perform the closing
> > transactions rather than use the inbuilt procedure, then they are just
> > ordinary transactionsand won't have the KVP pair in them.
> >
> > For closing transactions, they should always appear after any other
> > transaction for the period being closed so that the transferred balances
> > represent the true state of the accounts at the end of the period. This
> was
> > why accountants introduced an artificial 13th month into the financial
> year
> > so that all closing transactions were forced to occur fater any other
> > transaction that occurred within the year. Any required adjustments to
> the
> > accounts  are also usually carried out before the closing transactions
> for
> > the same reason.
> >
> > A list of key value pairs is a data structure that is part of each
> > transaction record. It allows arbitrary data to be added to the main data
> > structure (the transaction) without requiring that structure to be
> redefined
> > throughout the code. Only the code for processing the data in the KVP
> needs
> > to be added to the code base to add features requiring new data not
> > previously stored. The facilities for extracting it and adding it are a
> part
> > of the original transaction data structure. The KVP is also used in other
> > data structures within GnuCash for the same purpose.
>
>
> Thanks for your reply. I understand why you would say that the closing
> entries should be the last transactions, but let me explain why that
> doesn't work for me. The Gnucash closing entries are only two of about half
> a dozen closing entries that I have.
>
> I make a distinction between (a) ordinary income and expenses, and (b)
> several non-routine types of income or expense that I can't plan for. (a)
> are Income and Expense type accounts, and GC closes them into an Equity
> account called Ordinary Income Summary. (b) are things like Gain or Loss on
> Investments, or Legacies, which would dwarf ordinary income and expenses,
> and they are Equity accounts, not Income or Expenses.
>
> When I "close the books", GC generates two transactions, one summarizing
> income and one summarizing expenses. Then to have a transaction showing net
> income, I have to create it manually:
>
> Debit:  Ordinary Income Summary   $500.00
> Credit: Ordinary Income Summary   $425.00
> Credit: Net Worth                 $ 75.00
>
> Naturally, that transaction must follow the "close the books"
> transactions, since I don't know gross income and total expenses until
> after that transaction is created. And then my others:
>
> Debit:  Gain or Loss on Investments: $ XXXX.XX
> Credit: Net Worth                    $ XXXX.XX
>
> And so forth, for the other non-ordinary accounts.
>
> I know you suggested that I should create the closing transactions for
> income and expenses myself, but there are probably 50 accounts, so that
> seems like a lot of work.
>
> Surely there's a way within the GUI to make the special "closing"
> transactions into just regular transactions, so that I can enter the
> half-dozen final closing transactions and have them in the right order.
>
> --
> Stan Brown
> [hidden email]
> https://BrownMath.com
> http://OakRoadSystems.com/
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Re: [GNC] Gnucash-created "closing" entries

David Cousens
In reply to this post by Stan Brown
Stan,

At the present moment there does not appear to be any way to do what you
need to do. There is no option in the current close book procedure for
optionally setting the close date to anything else but the close date for
the period +12 hrs. This is set as the time of the transactions generated to
close the books.

I would raise a bug on bugs.gnucash.org describing your problem, if no-one
suggests an easier solution, This won't resolve your immediate problem but
will alert the main developers of the need to address your problem longer
term

Someone else may be able to come up with a better way of resolving your
problem so treat the below as a last resort. First you need to ensure your
data file is uncompressed(https://wiki.gnucash.org/wiki/GnuCash_XML_format).
Then exit GnuCash, make a backup of the original datafile before editing it.

The only suggestion I could make at this stage would be perhaps to use a
text editor to locate and edit your additional transactions in your data
file and set their transaction date-time to after the GnuCash generated
closing transaction time.
The hard part may be locating the correct transactions. If you note what the
memo fields are in GnuCash before you exit it for the transactions you need
to locate and/or alter you should be able to locate the splits containing
them which will be within the transactions. Verify carefully that you have
the right transactions though.  If you have any problems, restore a copy
from your backup of the datafile (keeping the original copy though) and try
again.

There is a copy of a transaction record from my datafile at the end of this
post so you have some idea fo what to look for.
You will need to first find one of the GnuCash closing transactions and note
the date-time it was posted i.e. see the section like:

 <trn:date-posted>
    <ts:date>2015-08-02 20:59:00 +1000</ts:date>
  </trn:date-posted>

Looking quickly at the code, it appears the same date-time is used for all
closing transactions so it should be possible to
 then locate your additional transactions and change them to a date-time
after the date-time noted from the GnuCash closing transactions. Perhaps add
a minute but be careful that the time you add doesn't change the date i.e.
time goes past 23:59:59.

Save the file and then reopen with GnuCash.

David Cousens

transaction record form XML datafile

<gnc:transaction version="2.0.0">
  <trn:id type="guid">6003472e9a890cbd3724825ae8d95462</trn:id>
  <trn:currency>
    <cmdty:space>CURRENCY</cmdty:space>
    <cmdty:id>AUD</cmdty:id>
  </trn:currency>
  <trn:date-posted>
    <ts:date>2015-08-02 20:59:00 +1000</ts:date>
  </trn:date-posted>
  <trn:date-entered>
    <ts:date>2015-10-23 10:20:49 +1000</ts:date>
  </trn:date-entered>
  <trn:description>MORGANS SEAFOODS      SCARBOROUGH
QLDAU</trn:description>
  <trn:slots>
    <slot>
      <slot:key>date-posted</slot:key>
      <slot:value type="gdate">
        <gdate>2015-08-02</gdate>
      </slot:value>
    </slot>
    <slot>
      <slot:key>notes</slot:key>
      <slot:value type="string">OFX ext. info: |Trans type:Generic
debit</slot:value>
    </slot>
  </trn:slots>
  <trn:splits>
    <trn:split>
      <split:id type="guid">a1bf65b2322f32623b5505e2b7a47ea7</split:id>
      <split:reconciled-state>n</split:reconciled-state>
      <split:value>2896/100</split:value>
      <split:quantity>2896/100</split:quantity>
      <split:account
type="guid">1ec460ba4ac0be56cc14b2a3319b2ff6</split:account>
    </trn:split>
    <trn:split>
      <split:id type="guid">c9fa643a812cd6fb177f0e2a62a30416</split:id>
      <split:memo>MORGANS SEAFOODS      SCARBOROUGH  QLDAU</split:memo>
      <split:reconciled-state>y</split:reconciled-state>
      <split:reconcile-date>
        <ts:date>2015-09-30 23:59:59 +1000</ts:date>
      </split:reconcile-date>
      <split:value>-2896/100</split:value>
      <split:quantity>-2896/100</split:quantity>
      <split:account
type="guid">b67f5b6d398e2e451743ba2359734428</split:account>
      <split:slots>
        <slot>
          <slot:key>online_id</slot:key>
          <slot:value type="string"></slot:value>
        </slot>
      </split:slots>
    </trn:split>
  </trn:splits>
</gnc:transaction>



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Re: [GNC] Gnucash-created "closing" entries

David Cousens
This post was updated on .
In reply to this post by Stan Brown
Stan,

https://wiki.gnucash.org/wiki/Closing_Books
https://www.gnucash.org/docs/v3/C/gnucash-help/tool-close-book.html

There is one other question which may be pertinent. I am assuming the gains
and losses you are referring to are realized gains or losses and not
unrealized gains or losses.  If they are, should they not be reporting in an
Income:Investment account rather than directly into Equity. Depending on
whether they are taxable or not they could report under Taxable or
Non-taxable subaccounts of Income. Investment income is normally regarded as
ordinary income in most jurisdictions.

If they are unrealized gains or losses, it is a common procedure to record
them under Equity where you need to track them, but these should not
normally be part of any closing procedure (not usually taxable) as they are
part of the permanent accounts. That is also why Assets and Liabilities are
not closed during a closing procedure only the temporary Income and Expense
accounts for the period.

Usually any taxation calculations for the closed period will produce a
taxation liability in the next period but would not normally involve
unrealized gains/losses.

See
https://smallbusiness.chron.com/journal-entry-record-realized-loss-investment-36486.html.

Any advice about this here needs to be considered as advisory/illustrative
only and used with caution. You should seek professional accounting advice
about how to record your gains/losses and legacies relevant to your
jurisdiction. Accounting for legacies can depend a lot on local legislation
and may or may not be classified as income depending upon the circumstances.
For example, when my wife received a legacy from her mother, the capital
value of the legacy itself was not taxable under our local legislation, but
any income received from it was thereafter.

David Cousens



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Re: [GNC] Gnucash-created "closing" entries

Stan Brown
In reply to this post by Stan Brown
David, you're opening up several cans of worms! I started replying to
each point, but an adequate reply would be very long indeed. (I stopped
at the third page, when I realized no one could possibly want to know
than much about my finances, and I wasn't comfortable sharing that much.)

Let's just say that I had already considered the points you raised. I've
researched my tax situation, and I'm confident I understand it
correctly. Regarding accounting practice, I may or may not be conforming
to GAAP, but I'm doing what makes sense in my situation. (That's if we
overlook the fact that most people would scoff at my using an accrual
basis for my books but a cash basis for computing taxes.)

> Date: Fri, 28 Dec 2018 22:12:36 -0600 (CST)
> From: David Cousens <[hidden email]>
> Subject: Re: [GNC] Gnucash-created "closing" entries
>
> ... I am assuming the gains
> and losses you are referring to are realized gains or losses and not
> unrealized gains or losses.  If they are, should they not be reporting in an
> Income:Investment account rather than directly into Equity. ...

> If they are unrealized gains or losses, it is a common procedure to record
> them under Equity where you need to track them, but these should not
> normally be part of any closing procedure (not usually taxable) as they are
> part of the permanent accounts. ...

If I were a business, I'd agree with you. But as an individual, I like
to start each year with Net Worth showing my net worth at the start of
that year, which means all other equity accounts have been zeroed.

> Usually any taxation calculations for the closed period will produce a
> taxation liability in the next period but would not normally involve
> unrealized gains/losses.
>
> See
> https://smallbusiness.chron.com/journal-entry-record-realized-loss-investment-36486.html.

I read your reference, and I'm already marking to market, just as it
suggests. I do it quarterly, since that's when I get statements. But I
don't see a need to keep a multi-year account of unrealized gains and
losses, because for all my accounts the amount I contributed to them
isn't relevant to my tax situation. The market value _is_ relevant,
again even if unrealized, because that will determine the amount I am
required to take as RMD (required minimum distributions).

Under US law, gains and losses, realized or unrealized, in my retirement
accounts are not taxes as such -- only the amount I actually withdraw
from an IRA or 401(k) account is taxed, and that's without
distinguishing between what I invested and what I gained or lost.

In my non-retirement account, capital gains and dividends are taxable
even if unrealized. And it's retroactive -- I won't learn until the end
of February 2019 how much of those I must report on my 2018 tax return.

This is getting awfully long, again, so I think I'd better stop here.
But I appreciate your raising the points you did.

--
Regards,
Stan Brown
Tompkins County, New York, USA
http://BrownMath.com
http://OakRoadSystems.com
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Re: [GNC] Gnucash-created "closing" entries

David Cousens
Stan,

The main thing is your books are telling you what you need to know and it is
working for you. i get your point about net worth.  It should be possible to
generate a custom report which will just calculate that without having to
close all the equity accounts to a single accoun to achieve that.

David.  



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Re: [GNC] Gnucash-created "closing" entries

Christopher Lam
That's the purpose of the current balance sheet.

Set price-source to 'most-recent' and it should calculate all
unrealized/realized (and trading) gains/losses, and add the appropriate
adjustments in the net worth calculator.

I'm not sure whether *any* other report will calculate these gains.

If these terms are somewhat unclear, then join the club.

On 30/12/18 7:13 am, David Cousens wrote:

> Stan,
>
> The main thing is your books are telling you what you need to know and it is
> working for you. i get your point about net worth.  It should be possible to
> generate a custom report which will just calculate that without having to
> close all the equity accounts to a single accoun to achieve that.
>
> David.
>
>
>
> -----
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Re: [GNC] Gnucash-created "closing" entries

David Cousens
Christopher,

Agreed the balance sheet should really do the trick since it is the state of
the accounts at a specific point. The only difference you usually come
across is where intangible assets are involved as these are generally not
included in net worth whereas they are in equity.

David




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Re: [GNC] Gnucash-created "closing" entries

Mike or Penny Novack-4
In reply to this post by David Cousens
On 12/29/2018 6:13 PM, David Cousens wrote:
> Stan,
>
> The main thing is your books are telling you what you need to know and it is
> working for you. i get your point about net worth.  It should be possible to
> generate a custom report which will just calculate that without having to
> close all the equity accounts to a single accoun to achieve that.
>
> David.
  And in the GENERAL case, "net worth" can be tricky. For some, major
assets might be intangible and/or conditional.

In cases like that, you might need to keep more than one set of books.
Not in the illegal sense but one set in terms of what your jurisdiction
considers real income/assets and another to include these other factors.
To give a very obvious example, in as far as I know all US
jurisdictions, increase in equity of one's primary residence is not
considered income (and only conditionally a capital gain) and for many
of us this can be a very large component of net worth.  Even when this
is just income/expense might be important in order to compare job
opportunities, etc. (let's say one of these included seriously major
"benefits" like housing, vehicle, etc. that are not considered part of
income by the jurisdiction).

Michael D Novack


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Re: [GNC] Gnucash-created "closing" entries

David Cousens
Stan, Mike

Australia has the similar provisions with your primary residence being
capital gains exempt so even realized gains are not taxable income in our
case. There are some restictions, e.g. if you sell within 12 months or have
a pattern of selling and purchasing which indicates conducting a property
investment business. Capital gains taxes only apply for realized gains and
losses on securities and investments.

I have dealt with that not with a separate set of books but by using
separate sub accounts for assets subject to capital gains tax and those that
are not with corresponding taxable and non-taxable sections in my income
accounts and expense accounts where necessary. I close those to
corresponding subaccounts of Equity:retained earnings so that I have the
required amounts for doing the appropriate tax calculations available from
the balance sheet. You can also customize the balance sheet and other
reports, to produce custom reports giving a tax specific version of the
reports as required.

If the tax status of the property or investment changes e.g. a previous
investment property becomes a principal residence
 and you sell the previous principal residence on retirement, you can just
shift it between taxable non-taxable categories at the data of the change.
(not shifting the asset account, just the asset value to a new account  in
the appropriate sub account).

We also have a fringe benefits tax payable by the employer on such
additional benefits not taxable in the hands of the employee but the
employee also has to report such benefits on their tax return. Our tax
system is a little simpler as our states ceded the right to collect certain
taxes to our federal government in return for imposition of a GST with a tax
sharing system with the states so there are no state taxes collectable from
employees ( income tax was informally ceded to the federal government at
federation in return for specific purpose grant allocations from income tax
which are largely population based). Employers however are still subject to
some taxes at the state level.

David Cousens



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