other current assets condo hoa

[LH45]

I think i need to set up an other current asset account for the condo assn Investment account. We use it as a reserve account so based on the market it has wins and losses.  Is this that correct was to set it up? Will it need to be reconciled like a bank account? I expect it to appear on the balance sheet.  Will it appear on the P&L, if so where? Any other info would be helpful.

Thanks

[QBsguru]

If you are the HOA, this would be the correct way to set up the investment account.  Interest and gains and losses are added each month to correspond to the bank statement.  Changes in market value are generally recorded using an OTHER INCOME account named UNREALIZED GAINS/LOSSES.  Actual gains and losses are not recognized until the funds are sold. 

Gains/Losses and Interest Income are P&L accounts.

[Rustler]

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@QBsguru wrote:

 Changes in market value are generally recorded using an OTHER INCOME account named UNREALIZED GAINS/LOSSES.  Actual gains and losses are not recognized until the funds are sold. 

Gains/Losses and Interest Income are P&L accounts.

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why income?

unrealized gains and losses should be an asset account with an offsetting account as equity, IMO

[QBsguru]

I disagree.  Unrealized gains/loss are an OTHER INCOME account and reflect market changes.  I would not touch equity since gains/losses are unrealized.  You might want to set Unrealized Gains/loss as a liability account, but not an off-set to equity.  The number in this account is not taxable income.  It only becomes a tax item when the investments are sold and off-set by Realized gain/loss account.  Have been doing it this way for 25 years and statements reviewed and audited by an independent CPA firm show this as acceptable GAAP treatment.

[LH45]

The more I read the more confused I become.  Thanks for helping me. The condo investment account is a reserve account but it will be years until we cash it.  So in the chart of accounts should the investment be bank or other income (called Unrealized gains/losses?  

[LH45]

I need a clarification. As the condo investment is a reserve account that will not be used for years should it be set up in the chart of accounts as BANK or OTHER INCOME. And also a chart of accounts called UNREALISED GAINS/LOSSES?  Would the one be a sub account of the other?

[Rustler]

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@QBsguru wrote:

I disagree.  Unrealized gains/loss are an OTHER INCOME account and reflect market changes.  I would not touch equity since gains/losses are unrealized.  You might want to set Unrealized Gains/loss as a liability account, but not an off-set to equity.  The number in this account is not taxable income.  It only becomes a tax item when the investments are sold and off-set by Realized gain/loss account.  Have been doing it this way for 25 years and statements reviewed and audited by an independent CPA firm show this as acceptable GAAP treatment.

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I could care less about the pseudo standard GAAP, this is small business and not subject the SEC regs.

Other income is a line item on the tax return, and is commonly used for things like sales tax discount income, reward point income, etc.

If you do post it to other income what is the offsetting entry?  Do you use Other expenses too?

If an asset is not sold, how can an unrealized gain be income?  the unrealized gain would increase assets it seems to me.

this article changes the name, but

https://strategiccfo.com/realized-and-unrealized-gains-and-losses/

and from the accountants community

Per the Form 1120 filing instructions for the Schedule L - Balance Sheet:

Line 26 - Some examples of adjustments to report on this line include:

• Unrealized gains and losses on securities held "available for sale."

https://accountants-community.intuit.com/articles/1613028-where-do-i-enter-unrealized-gains-for-a-bu...

[qbteachmt]

Bank is a type of Asset account that includes Functionality to make easier data entry.

You invested Funds into something that you call Reserve; what is this? CDs? Money Market account? Pork Belly Futures? That's what you need to identify. Example: I run a file for a client, a governmental entity. Reserves is a Banking Investment or Savings account.

Income is what you get spun off of it; then, you need to identify if that is Interest, Dividend, reinvested, etc. The Statements for the Holding are used to reconcile. Unrealized Gain/Loss are not part of the Financial Data. They are part of the Presentation Reporting to the board.

So, what is this Holding?