My client Donna wants all of her paper investments, such as certificates of deposits, mutual funds and IRA’s, tracked in her QuickBooks financial software.

Normally people use more specialized personal bookkeeping software, such as Quicken, to track all of their investment activities, simply because Quicken can normally be tapped in to automatically update your investment accounts each month.

However, I normally am not a fan of any automatic recurring updates straight to a general ledger, whether it be for personal or business purposes, simply because I have seen all too often these affected accounts in your general ledger turn into a runaway train, meaning, unless you are periodically checking the validity of these account balances (much like doing maintenance on your assets such as home and automobile), then most likely there will be unforeseen issues occurring that will be to the detriment of your books. That being said, I certainly would never risk the detriment of something as important as my financials, however all too often, I do see people engaging in this kind of financial neglect with the end-results being overspending and inaccurate tax filings.

To start, I simply create asset-type accounts in the general ledger with the names of each paper investment. I also create income-type accounts to book periodic activities such as dividends/interest reinvestments, short-term and long-term capital gains reinvestments. There also, in my opinion, needs to be another equity-type of account to track the simple upswings/downswings of the share and overall value of your investments. It’s important that this particular account is titled with the word “Unrealized” somewhere in its overall name. This is because your books will always reflect the current market value of your investments using my method stated in this article. However, if you choose not to reflect the market fluctuations in your books, then your booked value will only be reflecting the cost-basis.

Overall, for bookkeeping purposes, it is simply much easier to reconcile your books to the periodic investment closing statements using the current market value as your ending balance to reconcile to. However, the bookkeeping becomes a tad more complicated when you actually sell shares of your investments someday as you will have to make an extra entry to reflect any net market value gains/losses made (assuming the FIFO method), which that market value gain (or loss) should be noted either on your investment statement or you may have to login to your account online to ascertain this information. This extra bookkeeping entry will affect both an income gain/loss account and the equity account, as noted above. The net end-result for the equity account is zero (for this particular sold investment) if you have done the bookkeeping correctly for all of the previous activity in the life of this investment.

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.

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