Accounting for value changes in unit trust investment

[StephanieB]

Can you please help me with:

I deposited R20000 in a unit trust at a bank 2 months ago. On receiving my statement I saw that i received R12.33 odd rand as interest but that the Unit trust balance acturally decreased to R19715.71 as at 30 June 2011. How do I account for that in my books. When I made the deposit, my bank account obviously was debited with the R20000 and I opened a Bank Account for the Unit Trust in my books. That is the only transaction that I entered.
Now I am not sure how to enter the decrease. I think that the 12.33 needs to go to an interest income account but the decrease in the unit trust I am not sure of? Can you please try and help me. Did I initially enter the R20 000 correctly?

[Dave A]

There is no profit or loss without a sale.

When it comes to the capital value of the unit trust, you would capture the purchase price (as it seems you have) and only do the next entry when you sell any units.

[StephanieB]

Ok, so does this mean that I do not have to reconcile my Allan Gray bankstatement monthly as I would with my ordinary bank accounts. What about the interest received part?
I know this seems stupid to ask, but I have not ever had to do with something like this before. Thanks for the quick reply.

[Dave A]

Are you re-investing the interest or is it getting paid out into a bank account?

[StephanieB]

The interest is reinvested

[Dave A]

With the reinvestment angle this becomes a bit more relevant:

When I made the deposit, my bank account obviously was debited with the R20000 and I opened a Bank Account for the Unit Trust in my books.

I suggest you should rather have the unit trust investment set up as an "other asset" or similar (depends on how long you intend to keep the investment).

You would then credit interest income and debit the unit trust investment account, as effectively your interest received is being used to buy more units as you go along.

[StephanieB]

Thanks very much.