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At the end of the accounting year, enter the current Market Price of the security in the Price Current column of the Items table, normally using the year-end market price.
Banana Investment Accounting automatically calculates the Market Value:
Value Current = Current Qt. × Price Current
The Current Qt. is automatically updated based on the investment transactions recorded during the year.
The resulting Value Current represents the Market Value of the investment.
Closing Exchange Rate
In multi-currency accounting, Banana Investment Accounting automatically calculates the Value Current of each security in the base currency using the applicable current exchange rate.
This allows the Market Value of investments to be expressed in the base currency and used when calculating the required year-end valuation adjustments.
This is particularly important when determining the difference between the current Book Value and Market Value of foreign-currency investments.
Create Adjustment Transactions
Before closing the accounting year, make sure that all required valuation adjustments have been recorded.
You can use the Create adjustment transactions extension to automatically calculate and create the required adjustment transactions based on the difference between the current Book Value and the Market Value of each investment.
The extension records the adjustment in the Investment Balance Sheet Account specified in the Asset Account column of the Items table, using the appropriate Investment Value Adjustment Account as the corresponding account.
After the adjustment, the Book Value of the investment corresponds to its Market Value. Consequently, the balance of each Investment Balance Sheet Account should correspond to the sum of the Value Current amounts of all Items assigned to that account.
To verify the balances, compare:
- the current balance of the Investment Balance Sheet Account in the accounting records
- the Value Current of the related Items in the Items table.
If multiple Items are assigned to the same Investment Balance Sheet Account, its balance should correspond to the sum of the Value Current amounts of all Items assigned to it.
In this example, the corresponding values in the Items table confirm that the Item values are consistent with the balance of the related Investment Balance Sheet Account.
Recording the adjustment using a separate Balance Sheet account
If required by the applicable accounting treatment, auditing requirements, or reporting structure, the valuation adjustment may be recorded in a separate Balance Sheet account instead of directly adjusting the Investment Balance Sheet Account specified in the Asset Account column.
In this case, you can:
- manually record the adjustment transactions
- modify the account used in the transactions generated by the Create adjustment transactions extension.
The Price Current should continue to represent the current Market Price of the investment, and Value Current therefore continues to represent its Market Value.
When the valuation adjustment is recorded in a separate Balance Sheet account, the balance of the Investment Balance Sheet Account alone will not correspond to the Value Current of the related Items. The separate Balance Sheet account used for the valuation adjustment must also be taken into account when reconciling the accounting values with the Market Value of the investments.
Creating a New Accounting Year
When you create a new accounting year using the Create New Year command, Banana Accounting automatically carries forward the closing values required for the new accounting year.
For each Item:
- the closing Current Qt. becomes the Begin Qt. of the new year
- the closing Price Current becomes the Price Begin of the new year.
The closing balances of the Investment Balance Sheet Accounts are also carried forward as opening balances for the new accounting year.
The opening Value Begin amounts of the Items should therefore be reconciled with the corresponding opening balances. When valuation adjustments are recorded directly in the Investment Balance Sheet Accounts, the Value Begin amounts should correspond to those account balances. When valuation adjustments are recorded in separate Balance Sheet accounts, the balances of those accounts must also be taken into account.
After creating the new year, use the Check balances report to verify the consistency between the opening values of the Items and the corresponding opening balances.