bookkeeping for CFDs

[dbuinac]

I am completely new at this so apologies if the question sounds stupid;

I would like to start trading CFDs through my limited company. As I am currently doing bookkeeping myself (QuickBooks 2005 Pro) I am strugling with how to keep books for trades, which accounts to use, the differences in going long / short etc.

Could you please help if you have any experience?

Most appreciated!

[Joyous]

I would like to start trading CFDs through my limited company. As I am currently doing bookkeeping myself (QuickBooks 2005 Pro) I am strugling with how to keep books for trades, which accounts to use, the differences in going long / short etc.

I'll tell you straight that I don't know the answer to this but I thought that the whole point of contracts for differences is that there is no transfer of principal so there shouldn't be a long or short position to report.

Have a look at the Motley Fool website (www.fool.co.uk). There's a bulletin board there for day traders. Posting this question there may well get you the answer.

Regards

Joy

[Joyous]

OK. Had another think about this so here goes. Financial instruments held for trading go on the balance sheet as current assets. So if you buy a contract you credit the bank and debit whatever nominal code you’re using to record the contract.

The contract needs to be marked to market on a daily basis so at the end of every day you’ll need to revalue the contract and post the movement to the profit and loss account.

If you go short the contract goes under current liabilities, again marked to market daily with the movements going to the p&l account. I’m presuming that you’re not short selling so when you go short the other side is posted to the bank.

Hope this is of help.

Regards

Joy

[dbuinac]

Thanks for your reply Joy.

I understand that contract is my asset. Isn't it enough, however, to credit the bank and debit asset account when purchasing contract and then do nothing until contract is sold? And after the contract is sold, depending whether contract made profit or loss, make appropriate entries (I am not sure which, again - please help).

I will take advice on posting the query at fool.co.uk, but this is a pure bookkeeping question - i was hoping that this forum would be able to help better.

Cheers,
Dan

[multilingual]

Dan,

Give people a chance to reply before you grow disenchanted with the forum members.

You only posted about 90 minutes ago and many people are at lunch, in meetings, at home, at work, in the car, etc.

I am sure you will get a qualified response but not everyone lives in here 24/7.

:)

JB

[Joyous]

If the asset is held for trading then you're supposed to revalue it on a daily basis. If you're regulated by the FSA you have no say in this. Don't revalue and they'll come down on you like a ton of bricks.

I suppose if you're trading purely for yourself then it really depends on how fast you're turning these things over and how keen an eye you're keeping on the movement in value.

There is actually specialised software for this so I'm not sure that quickbooks is really what you should be using. As I said have a look at the Motley Fool, they may even be able to point you to free software.

Regards

Joy