Setting up a Day-Trading company.
I am in the process of setting up a day-trading company in Quickbooks Online - EasyStart, to keep track of my personal day-trading, Questrade account. I also understand that Quickbooks works poorly for this type of company. That said, I am used to Quickbooks and plan on making it work.
By reading the Quickbooks Community postings it becomes confusing if a Day-Trading company should be set up as either a Bank, Asset, or Equity account. There are too many opinions on which one is best. I started it off as a Bank account and then changed it into an Asset account. I am starting to think I should have left it as a Bank account, all the while I am trying to solve a problem that says it should be an Equity account!
Can you offer your opinion on why it should be one or the other?
To enter my trades into Quickbooks online I am just wanting to make a basic Journal Entry. This journal entry will consist of total purchases, total sales, foreign exchange fees, and commissions. Withdrawals will be made with the "Transfer" option.
If need be, there are very detailed Excel Spreadsheets showing each trade, which can be used by the government if they want to audit me.
So, I started entering all of this as a Journal Entry. I have a Questrade asset account, with a sub-account for Cash, and one for Securities. I was crediting one and debiting the other for purchases and sales of equities.
As is, I have Questrade acting as both the customer and supplier, which I am told is not a good idea. Any comments on that?
Everything was going fine until the difference between the purchase and sale of the equities came up. By doing some online research one poster suggested making an Asset account for the investments, named UNREALIZED GAIN ON INVESTMENTS, and also to create an Equity account named similar.
When one makes a profit, debit the Asset - Unrealized Gain on Investments account, and credit the Equity Unrealized Gain on Investments account. For a loss, debit the Equity Unrealized Gain on Investments account, and credit the Asset Unrealized Gain on Investments account.
That said, when trying to set up the Equity Account, under "Detail Type", there is nothing that sounds like the type of account I am trying to set up. I realize that these account types have been changed by Intuit over the years, so am wondering what you would suggest I use?
I've also noticed that no one agrees on what type of account an "Unrealized Gains & Losses" account should be. Equity, Asset, and Other Income are the ones that have been suggested!? Any comments on this one? When I transfer money out of my trading account directly to my personal account, only then will I consider it realized profit. I'm guessing that the Unrealized Profits & Losses account for my purpose should be an Asset account.
I played around with it for a bit and magically things balanced out in the end. Still, I am not sure if it was set up correctly. Here is an example of an end of month journal entry that shows how much was purchased and how much was sold:
- Questrade-Cash:Credit for Purchase, $1,000
- Questrade-Securities:Debit for Purchase, $1,000
- Questrade-Securities:Credit for Sale, $1,300
- Questrade-Cash: Debit for Sale, $1,300
- Questrade-Securities: Debit for Profit of Sale, $300
- Questrade-Unrealized Gains and Losses: Credit for profit of sale, $300
The above are all Current Assets sub-accounts, under my main Questrade account, except for the Unrealized Gains and Losses account, which is an Equity account. Does that make sense?
Thanks.