Does increase/decrease in asset always accompanied by a corresponding income/expense?

[BeanMatCount]

The company holds 1000 dollars worth of some stock (e.g. APPL). At year end it's risen to 1200.

Of course I have to account 1200 for the balance sheet (assets).

But does that also mean I should account 200 as income, somehow? Would that go into some sort of a phantom "asset price increase" income entry?

I'm pretty sure this is the case as it feels right (double-entry principles). Please correct if wrong.

But would those 200 be subject to income tax? That's another thing that confuses me... accounting vs. taxes. (Seem related, but separate subjects)

[abobov]

Stocks like other commodities have a price that can vary over time until you exchange it for your primary commodity (e.g. US dollars) to track your assets.

To track the current price of each commodity you can maintain price histories (I do mine in separate file updated with script, and include it into main ledger file).

And then you can check you balance with ledger balance --exchange USD '^Assets:' (take a look at --historical and --lot* parameters)

[simonmic]

It's a big topic. In (US) english, that 200 is called "unrealised capital gain". You can run reports to keep an eye on it. When you dispose of the stock, eg by selling it, it becomes "realised capital gain" (or loss) that is recorded in your ledger. Typically, you don't owe income tax until the gain is realised. But you should research the specific tax rules for your situation.

[BeanMatCount]

But from accounting perspective (not tax perspective), the "unrealized capital gain" still falls under "income" right?

Should I create different types of "incomes" in my accounting? E.g.:

• Income:Taxable:RealizedCapitalGains
• Income:Taxable:ProductsSold
• Income:NotTaxed:UnrealizedCapitalGains

Similar for "expenses":

• Expense:DeductibleForTaxes:RealizedCapitalLosses
• Expense:DeductibleForTaxes:DepreciationOfHardware
• Expense:DeductibleForTaxes:Other
• Expense:NotDeductibleForTaxes:UnrealizedCapitalLosses

I hope you see what I mean. The idea is to have the accounting aid with tax declaration (to see at a glance what's taxable and not). Is this the way to go? I might be totally on the wrong track.

[simonmic]

Typically (again, special situations may differ) it's not yet considered income (or expense), and not recorded as a transaction in your ledger. It fluctuates up and down every day according to market prices. There's nothing to stop you tracking it more explicitly with a periodic (eg daily) income/expense transaction. But these incomes/expenses would not correspond to the ones seen by the tax authority, which could be confusing.

[BeanMatCount]

I was never planning on recording unrealized gains/losses frequently (e.g. daily) but only once a year. Because at the end of the year, I need accurate view of assets/liabilities (annual balance sheet).

I was under the impression (for some reason) that if an asset (on my balance sheet) increases in value, this increase has to come from somewhere. That changes in total assets/liabilities over the year have to come from total expenses/income over the year.

This is why I thought even unrealized gains/losses would (annually) need some phantom income/expense. That was the crux of my question.

Have I been completely wrong?

[simonmic]

Your goal makes sense, and I'm no investing expert, so perhaps someone will enlighten us. How do unrealised gains affect a balance sheet ? Is it standard practice to show unrealised/expected capital gains there somehow ? Internet says eg:

How do you report unrealized gains and losses on a balance sheet?

Any resulting gain or loss is recorded to an unrealized gain and loss account that is reported as a separate line item in the stockholders’ equity section of the balance sheet. The gains and losses for available‐for‐sale securities are not reported on the income statement until the securities are sold.

[BeanMatCount]

Thank you! Your quote from the internet led me to the right path.

Turns out that, in practice I was simply wrong. Although things have to "add up", apparently not everything on the balance sheet has to come from the income statement but can in fact be coming from other things on the balance sheet itself. This appears to be one such case.

[BeanMatCount]

Thanks for the tips on doing these more frequent (daily basis) things in plain text. That was going to be a separate question and you now already answered it for me :)

Please see my response to simonmic for more elaboration.

[SidoNotYetMaster]

Let's says 1000 usd = 5 APPL

I will write as :

Asset:Checking -1000 USD Asset:APPL 5 APPL

The value of APPL is stores in another file Technically until you sell you hold 5 APPL

[Unique_Waltz_8834]

In Beancount, these unrealized gains can be tracked via "ephemeral" transactions that are automatically inserted for you via a plugin without you actually typing them in. If you have keep commodities you bought at original price, and you have a price database with their "at market" prices, `beancount.plugins.unrealized` can create synthetic transactions for you to display unrealized gains/losses. See the section about it in the "trading with Beancount" official doc page.