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Incoming cash and grants into RESP

General questions about using Fund Manager that do not fit into any other forum.

Postby ThomasK » Wed Feb 06, 2013 9:59 am

What is the proper way to record "cash in" and a "grant"?

1. For non-registered accounts, I understand the Transfer In, but for registered accounts -- TFSA, RRSP -- are contributions still entered via Transfer In?

2. in Canada, for Registered Education Savings Plans -- RESPs -- how do I record the Government's kick-in? For example, if I contribute $2,500 cash into the plan, the government adds a free $500. Is this done somehow through "User-defined" data types??

Thanks
ThomasK
 
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Location: Toronto, ON, Canada

Postby Mark » Wed Feb 06, 2013 10:28 am

Hi ThomasK,

I would record all incoming cash as a "Buy". You could do it as a Transfer In also, but a Buy is usually simpler. All cash transactions are recorded at a price of 1, and the shares equal to the value.

On the grants, it depends on whether you want to take credit for that free money in your return calculations. If you want to see the benefit of that grant in your returns, record it as a purchase at a cost of $0. If you do not want to see higher returns because of this grant, then record it as if you paid the market price for these added shares.
Thanks,
Mark
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Postby ThomasK » Thu Jun 30, 2016 11:06 am

Hi Mark,

Our government offers grants on contributions into RESP accounts.

I wish to record these incoming amounts like a 'dividend' and in order to keep these grants separate from stock dividends I changed the distribution label from "User-defined 1" to "CESGrant".

So, why is that when I enter a new Distribution Transaction, selecting my custom type CESGrant, in order to increase the cash balance I have to check it off as Reinvested?

Is it because I'm doing all this from WITHIN the Cash account??

Thomas
ThomasK
 
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Postby Mark » Thu Jun 30, 2016 11:18 am

Hi Thomas,

When you record any distribution transaction, that is money being paid out (or paid in for negative values). This in itself does not change the number of shares owned in that investment. Think about a stock dividend or interest payment from cash. These are types of distributions. Only if you take that received money, and re-purchase more shares will your share balance change.
Thanks,
Mark
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Postby ThomasK » Thu Jun 30, 2016 7:25 pm

Thanks Mark.

Okay, so as I have entered it:
Distribution Type = CESGrant (renamed User 1)
Reinvested = checked
Value = $250, Shares = 250, Price = $1

Thus, the Cash balance goes UP and the portfolio return calculations are going to treat the $250 as like it was a dividend coming in, yes?

It's just that this way I get to separate CESGrant amounts from actual dividends in a custom report.
ThomasK
 
Posts: 172
Joined: Tue Jun 05, 2012 9:46 pm
Location: Toronto, ON, Canada

Postby Mark » Fri Jul 01, 2016 9:17 am

Hi Thomas,

It is treated the same as a dividend for performance purposes, it is just in a separate bucket for tracking/reporting. The investment you recorded that in generated that $250, so that investment's returns get credited for earning that money.
Thanks,
Mark
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Postby ThomasK » Mon Jul 25, 2016 8:09 pm

Distribution Transaction CESGrant.jpg
showing the distribution ticket filled out
Distribution Transaction CESGrant.jpg (55.41 KiB) Viewed 2971 times
Thanks Mark. I hope your summer is going well!

Regarding the previous answer, I'm thinking about what you said that a dividend is linked to the stock for performance purposes...BUT as the CES Grant is just 'free cash' I'm now thinking that it's better to consider it as a form of 'interest' and not as a dividend as I said in my previous post.

Question 1:
Either way, I also need to keep the other headings of Dividends for dividends and Interest as interest. So, by inputting the CES Grants as "User-defined 1" (Original Label) am I correct that on a custom report I WILL be able to show those dollar amounts as a separate item?

And, if I'm going to go the route of considering the grant as if it was interest BUT I want to use a separate heading of the User-defined 1 to keep track of the government free money I'm seeing that I need to complete the ticket as attached. Checking off "Reinvested" is the only way to actually increase the cash balance...

Question 2:
Mark, you said earlier in a different thread:
A distribution transaction can be either "distributed" or "reinvested". If it is distributed, the money was just paid out (or put in if negative). If it is reinvested, no external money flowed. Instead, the money was used to buy more shares (or shares were redeemed to pay for a negative distribution).

Since you are trying to record account fees that came out of cash, you want to record a negative value distribution, and mark it as reinvested, so that shares of cash are redeemed to pay for it. If you didn't mark reinvested, the cash balance would not change, and it would be like you had sent it a check to pay for the fees.



Reading the above previous statement sounds like I should NOT be using "reinvested" as there was indeed an external flow. Also, reading the above statement, marking it as reinvested would NOT change the cash balance, but as the image of the ticket shows as marked reinvested, that in fact DOES increase the cash balance.

I apologize for not understanding the above and how it fits into me using User-defined 1 for the distribution transaction, but why if it is NOT checked as Reinvested does the cash balance not change? What is FundManager thinking the $250 is? I'm thinking that it would basically be a meaningless entry?? There WAS external flow of cash into the account, so the above statement either is incorrect or there's something afoot with how FM handles User-defined 1??

Is it me, the statement in italics, or how FM calculates from Dividend, Interest, User-defined 1 that I'm just not understanding?

Thanks Mark.
ThomasK
 
Posts: 172
Joined: Tue Jun 05, 2012 9:46 pm
Location: Toronto, ON, Canada

Postby Mark » Tue Jul 26, 2016 8:51 am

Hi Thomas,

1) You can record many different types of distributions: Dividends, Interest, user-defined, etc. They all work they same, but are just separated for reporting purposes. Your re-named user-defined distribution type is identical to Interest and Dividends, it is just put in a different category, so you can get a total/etc for just this one type of distribution, separate from your other distribution types. They all work the same as far as reinvestment options, and their effects on your performance numbers.

2) You didn't pay any money for these additional shares, so from that point of view there was no external cash flow. The money actually came from the government. By recording it as a reinvestment you are giving the credit for these funds to the underlying investment. You can either record this as a buy or a reinvestment to obtain more shares. If you stick with recording it as a reinvestment it is like the investment generated this money, and you put it back in for more shares. You could also record it as a buy, but then you can't categorize it separately from your own additions.
Thanks,
Mark
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Postby ThomasK » Tue Jul 26, 2016 7:23 pm

Thanks Mark,

That makes sense to me now!

Thomas
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