How to start with an Investment Accounting

This page outlines the main steps required to set up an Investment Accounting file in Banana Accounting and links to the detailed documentation for each topic.

Download Banana Accounting

You need to install Banana Accounting Plus on your computer.
Investment Accounting is available with Banana Accounting Plus version 10.2.8 or later.

• Download Banana Accounting+ (version 10.2.8 or later).
• Install the Investment Accounting extension using Extensions > Manage Extensions .

Before You Start

Investment Accounting combines double-entry accounting with investment management to manage investments within a single accounting system

This page assumes that you are already familiar with concepts such as:

• book value of investments
• valuation methods
• realized and unrealized gains and losses
• exchange rate gains and losses.

If you are new to investment accounting, please refer to the Theoretical Introduction before continuing.

Setting Up the Accounting File

There are two ways to start working with Investment Accounting:

• Adapt an existing accounting file
  If you already use Banana Accounting, you can add the Investment Accounting functionality to your existing accounting file by configuring the required accounts, Items, and settings. Each Asset account represents the accounting value of one or more investments.
• Start from a template
  You can also create a new accounting file from one of the provided templates. Templates already include the required tables, columns and settings, allowing you to start working immediately.
  
  Available templates:
  • Double-entry accounting with Investment Accounting
  • Multi-currency double-entry accounting with Investment Accounting

Setting Up the Exchange Rate Table

The Exchange Rate Table defines the currencies used in the accounting file and stores both opening and current exchange rates.

Before setting up the Accounts table, you need to define the currencies in the Exchange Rate Table.

• The current exchange rate is used as the default for revaluation and for calculating exchange rate differences (unrealized exchange rate gains or losses).
• The opening exchange rate is used to convert the opening amount of an account or the opening value of investments.

Setting Up the Accounts Table

Set up the chart of accounts and its structure (see Account table).

• Adapt the chart of accounts to your needs by modifying, adding or removing accounts and groups.
• Add the Asset accounts that will be used for the investments.
• For each Balance Sheet account with an opening amount, specify the opening amount in the account currency.
• Managing Cryptocurrencies
  Cryptocurrencies such as Bitcoin and Ether can be managed like other currencies. The main difference is that they may require 6, 18, or more decimal places. Templates are usually set up with 2 decimal places, but you can easily convert the accounting file to use more decimal places for foreign currencies.
  • Menu Tools > Convert to a new file.

Setting Up the Items Table

Each investment (share, bond, fund, ETF, etc.) is represented by an Item. In the Items table you set up the list of securities (see Items table).

• Create an entry (a row with an ItemId) for each investment.
• Each Item must be linked to an Asset Account.
  • The Item and its Asset Account must use the same currency.
  • The sum of the opening values of all Items linked to the same Asset Account should equal the opening amount of that Asset Account.
  • The sum of the current values of all Items linked to the same Asset Account should equal the current balance of that Asset Account.
• Specify the opening quantity and the opening price.
  • The opening quantity and price should match the current quantity and price in the previous year's file.
• Also specify the Asset Type (1 Shares, 2 Bonds).
• The program calculates the current quantity by adding the opening quantity to the quantities of all transactions for the corresponding Item (ItemId).
• You need to manually enter the current price of the investment.
  • You can also use the Update Market Prices command.

Enter or Import transactions

Transactions record both the accounting information and the investment-specific information.

In the Transactions table, you enter the transactions.

• Enter normal accounting transactions (debit credit).
  • You can enter transactions manually.
  • You can import transactions from a bank statement.
• Complete the Investment transactions.
  For transactions involving investments, you need to enter additional investment information.
  • Enter at least the ItemId.
  • For purchase and sales also, enter the Quantity.
    • When you enter the quantity and an amount is already present, the program automatically calculates 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, bank charges, interest, etc., you need to split the transactions across multiple lines.
    • For each element, you should create a separate line.
  • When selling investments, you also need to calculate the realized gain or loss on the investment and the related exchange rate gain or loss.
    • Use the Calculate sales data command to automatically create the supplementary transactions.

End of Year Revaluation

Year-end revaluation updates the accounting value of investments to their market value by generating unrealized gain or loss transactions.

At the end of the year, or whenever you want to prepare financial statements based on market values, you need to recognize unrealized gains and losses.

• In the Exchange Rate table, update the current exchange rate with the rate you will use at the end of the period.
• In the Items table enter the market price of each investment in the Current Price column.
• Use the Create Adjustment Transactions command.
  • The program automatically creates the transactions required to adjust the value and record the unrealized gain or loss.
  • The Quantity column will contain a neutral number (±123.00), so that the quantity can be used to calculate the transaction amount without changing the current quantity of the Item.
• For exchange rate differences, use the Create Exchange rate differences command.

End of Year Operations and Checks

Before printing the final Balance Sheet, you need to complete all end-of-year adjustments and checks. See:

• End of Year
• Opening and Closing