Tracking Paper Investments in Quickbooks

Paper investments, such as stocks, bonds, mutual funds, money market accounts, etc., are probably best tracked in a personal financial software such as Quicken because the auto-feeds capability of Quicken can handle and book these sophisticated entries to recognize events such as reinvested dividends, capital gains and interest income. However, not all of us are fans of Quicken (for various reasons) and prefer to use software more pertinent to business type activities, such as QuickBooks.

If you understand the very rudimentary logic of ongoing events in personal and business finance, then you can use rudimentary skills such as paper and pencil, spreadsheets or QuickBooks to track just about any financial event.

So, for tracking investments in QuickBooks, I prefer to create an Equity type account to track unrealized gains and reconcile to changes in market value (no purchases or withdrawals) of my paper investments. Then, when it comes time to actually sell my investments, or at least a portion of them, I would make the following journal entry (this is just an example assuming I originally purchased the stock for $90 and it appreciated in value over time by another $100):

DRCR
Stock Asset$190Sales Price
Equity$100Previous booked unrealized gains (changes in market value)
Cash$190Cash received from sale of stock
Income$100Taxable income from sale of stock

As stated above, if you understand the rudimentary nature of financial events (i.e. debits and credits) then you can create your own system anywhere to recognize your financial events (according to Generally Accepted Accounting Principles).

The power of sophisticated software is its coded ability to spit out reports to you at any time (such as for filing tax returns, board meetings with your investors, or reports to your creditors). But don’t ever let software limit you on your methods of recognizing your financial events.

Still have questions? Email them to help@accurabooks.com. We are happy to help!

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