Investment anomalies?

[aga]

On 19/01/16 02:41, Jeff Barlow wrote:
> On 01/18/2016 05:25 PM, Jack wrote:
>> Two separate issues.  First, I'm not sure we're using the same
>> terminology.  They pay a dividend, which needs an assigned income
>> category, so it can be properly allocated for tax reasons.  Most
>> commonly, all of that amount is used to buy shares, so some number of
>> shares get added to the holdings, and there is no cash to be transferred
>> to a brokerage account.
>

> Hello, I don't mean to hijack your thread but I have some closely
> related issues.

No hijacking is involved - it's a free-for-all!

> First let me concur that the category amount on a
> reinvested dividend sould never be zero. If it was then there is no
> transaction to record. As Jack says it's exactly a dividend and a buy
> rolled into one. The dividend is income and must be accounted for as such.
>

But some transactions involve no money, add or remove shares for instance.

The snag is that any dividend gets added into the transaction total, 
together with the share cost.  That dividend/category payment will add 
to your total income, and really is a duplication as it will also appear 
in the value of the involved shares.  At least that's how it appears to 
my simple non-accountant's brain.  I don't see how the income can 
purchase shares and also appear as an apparent dividend payment. 
Perhaps someone can put me right on this.

> I receive dividends from several mutual funds. Some are reinvested in
> shares of the same fund. Some are used to buy shares in a different fund
> from the same institution (The Vanguard Group). Some are paid as a cash
> transfer to my checking account (an ACH transfer). No broker is
> involved. There is no actual brokerage account. Vanguard does not allow
> cash accounts. Most of these transactions represent taxable income and
> need to categorized as such even though many involve no cash flow.
>
It's not unusual for 'virtual' accounts to be employed, sometimes to 
allow for delays between, say, a cheque being raised and the bank's 
clearing of it.  Superficially, from the KMM point of view, everything 
is simple and straight forward, but the users are far more creative than 
that.

> The only way I've found to record all these transactions in KMM is to
> employ a fictional brokerage account within KMM. I have to record these
> single transactions as two separate transactions into and out of this
> fictional brokerage account.
>
> Since this fictional brokerage account does not indeed exist in the real
> world one would at least expect it to maintain a zero balance. Alas, due
> to KMM rounding errors that is not even true.

Rounding errors in what parameter?  Presumably not in the monetary side, 
as generally a fixed two decimal places is the norm, except in a few(?) 
countries.
>
> I am currently waiting to fill out my income tax returns until I receive
> statements (1099s) from Vanguard because the numbers I get from KMM
> never quite match reality.
>

For the time being, at least, I'll leave this aspect well alone, or I'll 
be bound to upset someone.

Allan