Capital additions and removals
This article explains how to record capital additions to, and removals from, existing assets. Capital additions include things such as renovations or improvements to a property or other assets, purchasing additional shares in a company, or contributions to a PIE fund investment.
The process records both the origin of the funds used for the capital addition (the expenditure) and the updated value of the existing asset (the capital addition).
Capital removal involves the sale or other removal of part of an asset. Here the transaction records the destination of the funds removed from the asset, and the updated value of the existing asset.
Note that, where an asset has to be revalued for reasons other than capital addition or removal (eg. shares owned by a trust change in value, or property valuation changes), these changes should be recorded as an asset revaluation, as there has been no addition or removal of the capital.
Adding capital to an asset
To record the increase of the value of an asset, navigate to the trust's Ledger tab and either:
1. Click on the "I would like to..." drop-down menu and select Add to an asset.
2. Open the Accounts>Chart of Accounts section, place a tick next to the asset you want to add to, and then click on the Add to button on the slide-out menu.
3. On the Details of the addition form record:
the asset being added to
the value of the addition
date the addition was made
4. You can then record where the added funds came from. Again, either select an existing account or create a new account. The amount of the addition will then be debited from this account, to balance the amount credited to the asset account.
If you choose not to allocate the source of the addition into an account, the unallocated amount will automatically be balanced against the trust's Suspense account and can be reconciled later.
For more on using and reconciling the suspense account, see the article here.
5. Select the Create button in the top right to save the details.
After saving the capital addition, you will see a record of the transaction in the transactions tab of the ledger displaying both:
the increase in the value of the asset
the decreased balance of the account which paid for the capital addition (or the suspense account if this field was not completed).
Removing capital from an asset
To record the removal of capital from an asset, navigate to the trust's Ledger tab and either:
1. Click on the "I would like to..." drop-down menu and select Sell an asset.
2. Open the Accounts>Chart of Accounts section, place a tick next to the asset you want to remove capital from, and click on the sell button on the slide-out menu.
In the form that opens, a partial sale can be recorded by setting a sale price that is different from the current value of the asset. Tick the checkbox indicating that the asset is being partially sold down, and complete the remaining fields.