How to start with an Investment Accounting

Banana Accounting Software

You need to install Banana Accounting Plus on your computer.
Currently, the Investments and Portfolio Accounting functionalities are available only in the:

• Banana Accounting Dev-Channel (From version 10.2.1)
• Install the Investment Accounting extension.
  Extensions menu > Manage Extensions command and install the Investment Accounting extension.

Theoretical prerequisites

The software assume that the user already know how an Investment accounting works and in particularly the problematic of accounting value, accounting evaluation method, realized and unrealized profit and loss.

• See Theoretical Introduction. 

Setup the Accounting File

There are different ways to set up an Investment Accounting file in Banana Accounting:

• Adapt an existing accounting file
  Most accounting files do not initially include investment or portfolio management. In these cases, the Investment Accounting functionality can easily be added to an existing file, allowing you to expand your current setup without starting from scratch.
• Start with an existing template
  Accountants or professionals managing multiple entities with investments often prefer to start a new file by copying an existing one that has already been configured for investment accounting. This ensures consistency and saves setup time.
• Template examples
  To help users understand how Investment Accounting works, we provide two ready-to-use universal templates.
  These templates include all the necessary tables, columns, and settings to get started quickly and explore the full potential of Banana’s integrated investment accounting system.
  • Double-entry accounting with Investment Accounting
  • Multi-currency double-entry accounting with Investment Accounting

Setup the Exchange Rate Table

Before setting up accounts you need to setup currencies in the Exchange Rate Table. 

• The current exchange rate is used as a default for reevaluation and calculation of exchange rate differences (unrealized exchange rate profit or loss).
• The opening exchange rate is used for converting the opening amount of an account or the opening value of investments.

Setup the Accounts Table

You have to setup the accounts list and structure for your accounting (see Account table). 

• Adapt the accounting plan to your needs by modifying, adding or removing accounts and group.
• Add the Investments accounts (Assets accounts) that will be used for the securities.
• For the balance sheet account with an opening amount you have to specify the opening amount in the account currency.
• Managing Crypto-Currencies
  Crypto-currencies like Bitcoin, Ether, can be managed as normal currencies. The main difference is that they use 6, 18 or more decimal places. 
  Template are usually available with 2 decimal places, but you can easily convert the accounting to use more decimal place for the foreign currencies.
  • Menu Tools > Convert to a new file.

Setup the Items Table

In the Items Table you setup the list of securities (see Items table).

• Create an entry (Row with ItemId) for each securities.
• Each Item (Investment) need to be associated with the Asset Account.
  • The currency of the Investment and of the account must be the same.
  • The sum of the begin value of all items with the same asset account should be equal the opening amount of the asset account.
  • The sum of the current value of all items with the same asset account should be equal the current balance of the asset account.
• Specify the begin quantity and the begin price.
  • The begin quantity and price should be the same as the current quantity and price in the file of the previous year.  
• Specify also the Asset Type (1 Shares, 2 Bonds)
• The current quantity is calculated by the program by summing the begin quantity with the quantity of all transactions for the specific Investment (ItemId).
• You need to enter manually the current price of the Investment.
  • You can also use the command Import Market Prices.

Enter or import transactions

In the Transactions Table you enter the transactions.

• Enter normal accounting transactions (debit credit)
  • You can enter manually.
  • You can import from a bank statement.
• Complete the Investment transactions 
  The transaction are relative to securities you need to add specific information.
  • At least enter the ItemId.
  • For purchase and sales also enter the Quantity.
    • When entering the quantity and there is already an amount the program automatically calculate the unit price.
    • Make sure that the Balance sheet account is the same as the Asset account defined for the Investment.  
  • If you want to separate commissions, banks cost, interest, etc, you need to split the transactions on multiple lines.
    • For each element you should create a separate line.
  • When selling securities you also need to calculate the realized profit or loss for on investments and exchange rate.
    • Use the command Calculate sales data to let the program automatically create the supplementary transactions.

End of year reevaluation

At the end of year or at anytime you want to print balance sheet with the investments evaluated to the market price you need to register the unrealized profit and loss. 

• In the Exchange Rate table update the current exchange rate with the one you will use for end of period.
• In the Items table enter in the Current price column the market value of the investment.
• Use the command Create Adjustment Transactions.
  • The program will automatically create the transactions that will adjust the value and book the unrealized Profit or Loss.
  • The quantity column will have a neutral number (±123.00), so that the quantity will be used to create the transaction amount, but will not change the current quantity of the items.
• For the exchange rate use the command Create Exchange rate differences.

End of year operations and checks

Prior to printing the final Balance sheet you you make all the end of year adjustments and checks. See:

• End of Year.
• Opening and Closing.