Tracking Investments Bookkeeping- Part 5

Part 5 in this series of tracking investments bookkeeping will cover cost basis and market value adjustments.

To re-cap from what you may already know:

Cost Basis = What you actually paid at the time you purchased your stock.

Market Value = What your stock holdings are worth today on the open market.

If you engage in your own bookkeeping tracking of your stock holdings, say with a basic off-the-shelf, small business bookkeeping software such as QuickBooks, you will have to understand that, in order to process a basic Balance Sheet that shows you the value of your current holdings, you will need to post the original Cost Basis and periodic Market Value Changes (probably on a monthly basis would be fine) in your bookkeeping system.

As you know, the Balance Sheet must “balance” between the Assets and Equities (Liabilities are included within the Equities section of a Balance Sheet but not relevant for this article).

So, let’s now see examples of Cash Basis (purchase) and Market Value postings in your bookkeeping (for Balane Sheet purposes only):

For the Cash Basis Original Purchase Price of the Stock:

Note: “Cost Basis” can be a sub-account of your XYZ Stock asset account for cleaner reporting.

Note: The Balance Sheet remains balanced as you are trading one asset (Cash) for another asset (Stock).

To Post a Market Value Change later on:

Note: The Asset “XYZ Stock – Market Value Change” is a sub-account of your XYZ Stock asset account (just like for the other sub-asset noted above).

Note: The Balance Sheet remains balanced as you are increasing an Asset and Equity type of account for the exact same amount.

Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.