Accounting for bond call/redemption

[Richard M Kreuter]

Hi all,

I've had no luck finding detailed discussion or examples of how to
account for bonds (and perhaps other similar commodities) in Ledger.

Suppose you buy a bond, Foo, at a 5% premium (i.e., 1.05 times par), and
you want to represent the premium in the lot price for Ledger's
reporting purposes. So you write it down as, say,

# Let's ignore any transaction fees/commissions/costs.
2018/03/01 * Buy some Foo bonds at a 5% premium
Assets:Brokerage 10,000 Foo @ $1.05
Assets:Cash $-10,500

I believe that if you should sell those bonds later, you might record
that as

2023/02/15 * Sell Foo bonds
Assets:Cash $10,000
Assets:Brokerage -10,000 Foo {$1.05} [2018/03/01] @ $1.00
Income:Capital Losses $500

However, suppose that instead of selling, the bond is ultimately called
or redeemed (i.e., the issuer returns to you the par value,
$10,000). How should you record that in the journal in order for the
redemption transaction (a) to balance and (b) to leave you with zero
units of the lot you originally purchased? It seems as if one way to do
it is this:

2023/02/15 * Redemption for Foo
Assets:Cash $10,000
X $500
Assets:Brokerage -10,000 Foo {$1.05} [2018/03/01] @ $1.00

but that leaves me with the question of what sort of account X should
be, i.e., how to record where the $500 went. (I believe that the $500 is
not a Capital Loss, but I might be mistaken.)

Alternatively, I suppose it would be possible to log a separate posting
representing the premium at the time of purchase, i.e., have the Buy and
Redemption transactions look like this,

2018/03/01 * Buy some Foo
Assets:Brokerage 10,000 Foo @ $1.00
Y $500
Assets:Cash $-10,500

2023/02/15 * Redemption for Foo
Assets:Cash $10,000
Assets:Brokerage -10,000 Foo {$1.00} [2018/03/01] @ $1.00

but in this case I still don't know what sort of account Y should be;
and using $1.00 for Foo's lot price at purchase time would tend to
squander Ledger's ability to compute capital gains / losses.

Any insights/recommendations?

Thanks in advance,
Richard

[psionl0]

I would probably record the transactions as follows:

2018/03/01 * Buy some Foo bonds at a 5% premium

Assets:Bonds       10,000 Foo @ $1.00

Expenses:Premium   10,000 Foo @ $0.05
Assets:Cash        $-10,500

and later

2023/02/15 * Sell Foo bonds
Assets:Cash                 $10,000

Income:Bond Sales           -10,000 Foo  @ $1.00
Assets:Bonds                -10,000 Foo  @ $1.00

Expenses:Cost of Bonds Sold  10,000 Foo  @ $1.00

The premium has been taken care of when you first bought the bonds and does not need to be dealt with again.

If you sell the bonds at a different price then that is automatically taken care of by recording the selling price of the bonds.

Your capital gain will be the bond sales less the cost of bonds sold less the premium on the bonds bought.

[JPP]

Why wouldn't a call count as a capital loss?  I also like the approach of splitting the purchase into two transactions, but I might make the premium another asset instead of an expense.

2018/03/01 * Buy some Foo bonds at a 5% premium

Assets:Bonds          10,000 Foo @ $1.00

Assets:Bond-Premium   10,000 Foo @ $0.05
Assets:Cash           $-10,500

Then depending on your local tax rules, you could reduce the bond premium asset either by amortizing/expensing it each year over the life of the bond, or book it as a loss all at once in the case of a sale or a call.