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I bought an old car two years ago for 4000$. Now I am selling it for 2000$. Meanwhile I had much repairs which exceeded all the prices. Determining the value of such an old car is hard.

Once upon a time, I put the following transaction of 4000$ into Expenses:Transportation:Car from my bank account.

Today I put $2000 into my bank account but the question is: Where to put the other transaction?

My question is (partially) answered in: https://lists.gnucash.org/docs/C/gnucash-guide/ch08s08.html However, I have a couple of questions here:

It seems to be a hassle to create an account for everything I own ... and particularly an older car will only depreciate in value. I am not sure if it is fair to call this "Asset" and to account for it as such.

But if so, ... if I account for House and Car I own like this ... where does it end? TV for 4000$? TV for 200$? Mobile phone? Laptop? All these things have sort of "value" but only depreciate and either I sell them at some point at a very low price or use them until they die. And for all of them, assessing the "market value" is hard and it's a pain to keep track of it.

In the end, I always put things that I bought (including this 4000$) in Expenses.

What is the proper way to do this? Is it just "definition" that this is done for real estate and cars but not TVs, laptops, phones, furniture?

Furthermore, in the linked tutorial the house is sold for a lower price than it was bought (as said, this will be the case for nearly everything else that's used). Still - in the tutorial it is put as NEGATIVE value into Income:Realized Gain:House. But that's clearly not an income - it's the opposite. Why?

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    Are you asking about where that other $2000 went? It went into depreciation. Jan 22 '18 at 5:29
  • No, I know that. My questions are in the post. They are a general question about tracking all stuff (if I track the "value" of cars, why not TV, phone, laptop, furniture, ..., clothing?) It sort of does not make sense to me. And I am questioning if this is the way to do it and if so, where to put the $2000 if I sold the car. Furthermore, why is the LOSS accounted for in Income:Realized Gain:House in the tutorial linked?
    – divB
    Jan 22 '18 at 21:22
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    You don't track everything because it's too much hassle for very little benefit. It's not worth it to amortize a tv or laptop because who cares? You budget for a save for a new tv or laptop, and then its essentially a sunk cost. You can budget for when you buy a replacement but to keep track of all that is a waste of time. Even doing it for a vehicle is questionable. Jan 22 '18 at 22:36
  • Yes, this is what I mean. But the question is: If I still sell it, where does the "other end" go? E.g. a negative entry in Expenses:Phone? An entry in Income:Phone? Income:Sold Stuff?
    – divB
    Jan 22 '18 at 23:50
  • A negative entry into expenses:phone would be a positive cash flow, so you could put it under assets:cash or something like that. It's all debits and credits. When you buy a phone, you spend money but gain the asset. When you sell a car you lose the asset but gain the cash. Jan 23 '18 at 17:45
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Most people are going to list their house as an asset and some will also list their vehicles (I do). I don't go any further than that, but also have nothing of value remotely close to those two items. For the few items that I do own worth more than say $1000, I generally plan on keeping them forever (i.e. until it is effectively worthless), so it's just an expense when I buy it. If I had something else of immense value, say a rare painting worth $100K, I'd also include that.

So where to draw the line is completely up to you but two good starting points are a) Is it worth a 'considerable' amount of money? and b) Do I ever intend to sell the item and recoup some of that money? If yes, then it might be worth tracking appreciation/depreciation. Note that most items people purchase over time become worthless relatively quickly - so any time spent accounting for them will ultimately lead to significant effort trying to figure out how much your next garage sale might be worth.

If you still want to track these items, you'd do so the same way. Let's use a Cell Phone as an example, an expensive one:

Buy iPhone: Assets:Checking -> Assets:iPhone $800

Assume it depreciates every month by 10%: Month1: Assets:iPhone -> Expenses:Phone -$80 Month2: Assets:iPhone -> Expenses:Phone -$80 ... etc....

As for the mechanics of the other transfers:

When you purchase the asset (let's say your car):

Assets:Checking Account -> Assets:Car $4000

Then either yearly, monthly, weekly or whatever your tolerance for pain, you can update the value of the vehicle. Let's say you did this yearly:

Year before last: Assets:Car -> Expenses:Car Depreciation. $1000

Last year: Assets:Car -> Expenses:Car Depreciation. $1000

Now the asset accurately reflects that it is only worth $2000:

Assets:Car $2000

When you sell it: Assets:Car->Assets:Checking $2000

And the Assets:Car account will have nothing in it as it should.

The process is the same even if you take out a loan for the vehicle, but the initial transfer comes from Liabilities:Car Loan.

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  • Ok, this helps. Could you also include the info from the first part? Say, you are selling your phone/laptop/furniture for 200$, 2000$ and 5000$ where would you book this "income" to?
    – divB
    Jan 22 '18 at 21:59
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    Added an example for phone - but ultimately, you could just lump this stuff into an asset called Assets:Misc where you could add things that you feel have value into it phone/laptop/furniture: e.g. Assets:Checking -> Assets:Misc (New Couch) $2000. Then transfer back to checking when you sell it (which looks just like income).
    – Andy
    Jan 22 '18 at 22:09
  • Thanks, even better. But - what about selling something that was never intended to be tracked and never tracked? See, phone example: Assets:Checking -> Expenses:Phone 800$. Then I sell it for 50$. Would you just have Income:Selling Stuff or handle this differently?
    – divB
    Jan 22 '18 at 22:28
  • Ah I see. I wouldn't add it to Income, rather I'd just create an asset for it, but transfer the money from Equity:Opening Balances. Equity:OpeningBalances -> Assets:Misc (Couch) $2000. You could use 'Income:Selling Stuff', I personally just like to keep the Income account for taxable/retirement type account where I'm going to get a statement or pay stub.
    – Andy
    Jan 22 '18 at 22:33
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    Another thing you can do is list as an expense and then when you sell it, transfer the money from the expense account to the checking account. This is similar to how rebates are handled, but works well for selling random stuff as your expense account will then just reflect the total cost of ownership after the sale. This is by far the simplest way to handle these sorts of things IMHO.
    – Andy
    Jan 22 '18 at 22:36
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Depreciation is the answer.

The "proper" way is that, yes, each item you buy depreciates over time. How long for and how fast depends on the item: A phone may depreciate 60% in the first year and 40% in the second, while a house may depreciate 2% a year for 50 years.

In practice, items under some amount are considered expenses rather than assets. For my tax authority (New Zealand) that amount is $500. Before I knew that, I was claiming depreciation on everything used in the business. It is, as you point out, a hassle. You are not claiming a tax reduction based on these numbers, so you can use whatever number you like, or simply arbitrarily decide for each item whether the residual value after depreciation is ever likely to matter (i.e. whether or not you think you'll sell it).

Another, much simpler, option is to depreciate everything 100% the instant you buy it, and treat any money you get from selling your used stuff as uncategorised income.

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  • That's clear so far, the question is more about best practice(s). You give some indications but not completely. Buying a house make sense to me to put it as an asset and depreciate it.A new car probably as well - although, as I said it will always just loose value, so the question is left why it is still written in Income:Realized Gain:House in the above tutorial. Finally, where to draw the line? Furniture, TV, laptop, etc? Again, the concept was already clear from the post, my question revolves around best practice for a private person using gnuCash.
    – divB
    Jan 22 '18 at 21:26
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Adding a new answer because this is too much information for a comment..

Your example blurs the lines unnecessarily- "Depreciate a $4000 car, why not a $2000 laptop?". Most cars cost well over $4K, especially newer cars. Instead of focusing on the value of the item, I suggest you shift your perspective and think of a different dividing line based on the likelihood of reselling the item (with predictable price fluctuations). In this context a house, car, boat, and collectibles... all are likely to be resold. Laptop, phone, TV... are less likely.

To give an example of lower-price item which is very likely to be resold, think about stocks. You buy an item:

Assets:Checking -> Assets:Investment:Stock

then after some time the price has fluctuated and you sell the stock. If the stock has gained or lost value, you need to account for that change in value. The general rule to use when accounting for appreciation and depreciation is this: Both sides of the asset account (credits and debits) need to balance out before the account can be closed. Thus, if you purchase an asset for $1000 and sell it for $1200, there is a $200 imbalance in that account. You can correct this by transferring

$200 from Income:Capital Gains -> Assets:Investment:Stock

and the account will be balanced. Likewise, if you buy for $1000 but only sell for $700, you can create a negative transaction:

$300 from Assets:Investment:Stock -> Income:Capital Gains

and the stock account will be balanced (you might want to add a memo "Capital Loss" so that later you know this was intentional). Using this paradigm helps to keep track of taxable events, totaled over the course of a calendar year; but the same ideas transfer very nicely over to selling other physical assets which have similarly gained or lost value.

To summarize, accounts representing a physical asset do not retain any value, so any difference between the purchase and sale price get accounted for with transfers from an Income:Capital Gains account (whether it's a gain or a loss on the transaction).

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