Some clients have been concerned about our
requirement to upgrade their accounting system from Quicken to QuickBooks. One
of the complaints is that QB doesn't have the same ability to automatically
update stock holdings to their current market values, as you can do with
That is true. However, such a capability has no bearing on keeping good
books for proper accounting and tax return preparation.
This is really a difference between actual historical costs and temporary market
fluctuations. Proper accounting, and tax return reporting, are based on actual
historical costs, which can be entered appropriately in QB.
QB has the ability to set up an asset account for stock investments and then
enter the details of the purchases (corp name, number of shares, etc) in the
memo section of the register.
When the stock is sold, you enter the gross sales price into a QB income account
and transfer the cost of the stock from the asset account to a Cost of Assets
Sold contra-income account. It isn't very complicated and we do it all the time
for scores of clients.
The changes in the market value of a stock, or any other asset, have no effect
on taxes as long as they are still owned. We don't pay taxes on appreciation of
currently owned assets; nor do we deduct losses for assets that have gone down
in value, yet are still owned. Seeing how much stock holdings are worth is
useful from purely an informational aspect. What I am telling clients who want
to utilize Quicken's automatic market update feature is to continue to use
Quicken just for that. Everything else, including an account for the historical
cost of the stocks, should be recorded in QB.
My appreciation for the benefits of everyone using QB for both personal and
business bookkeeping grows daily, especially when I have to work with a client's
records that are not yet on QB. The ability to pick up every item of income and
deduction is magnified tremendously when all bank and credit card accounts are
maintained properly in QB. Those people who insist on using a shoe box method of
record keeping are literally tossing away thousands of dollars in lost
deductions. I see this constantly.
We have some clients who have well over a thousand trades each year, mostly in
options. Since almost all of the actual activity happens within their stock
broker account, we don't post each trade into QB. We just use the stockbroker's
year-end recap report (usually 100+ pages long) and enter the details into our
Lacerte tax prep program from there. The QB account just shows how much the
client has deposited into that particular stockbroker account. Showing each
individual trade in QB would be overkill, even for someone like me, who
appreciates perfect bookkeeping.
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This page was last updated:
Tuesday, January 31, 2012