The cost bases of mutual funds are obtained to find out the real value of the shares or property at the time of its receiving. The calculations are simple but a little tricky. It is best to hire service of the person who is good in mathematics and knowing the properties. In this manner you will perfectly stay safe from committing any mistake in the procedure. The person you would hire will do all the work for you and you will simply have to supervise to make sure that you are getting the right numbers along with the right data. On the other hand the procedure is not that much complicated that if a person is willing to do it by himself then he can do it with a little effort. He will only have to follow the proper procedure.
Initially you must know about the terms used in the procedure like NAV or price per share. This will help you make decision while you are making your investment and figuring out the cost bases of your mutual funds. The proper procedure to the task will be to perform it systematically starting from arranging all the figures and numbers on a spreadsheet. It will be very much assisting as you will be having all the facts and figures in front of you in order. Make separate tabs for the mutual funds, cost and the day of purchase along with the amount of purchase along with rest of the details.
Secondly you must be having all the essential paperwork which includes the confirmation statement or receipt of the original purchase. This statement will enable you to note down all the important facts and figures in the tab of the mutual funds. Look out for all the transactions made along with the current cost of the shares. It will be very much convenient to you if you are aware of the cost of the shares on daily bases or weekly bases to be precis. With the help of the papers you have related to the transactions, investments and shares you can fill up the spreadsheet with the relevant information. The papers will make sure that you don’t have the incorrect information.
The accounting procedures of the IRS and those approved by them are the most authentic ones and are accepted that is why it is essential that you select the procedure which has been approved by the IRS for all the accounting which you are going to do on the spreadsheet. Calculate and sum out the specific shares along with the average cost. It is completely up to you which method you will choose to do the accounting. You can apply the method of the specific shares or the FIFO method. The method of the specific shares is much preferred. The reason is that the FIFO method uses all the previous purchases and their amounts which can become a little tacky. The shares which were sold initially are taken out and given priority above all.
In average cost method, deducing the final amount will become very easy since all the person has to do is to calculate and sum up the average price per share. Once that is done the multiply the amounts which are deduced with the NAV values. Now all which has to be done is adding the total. Once the total has been concluded then this amount will be divided by the value of all the shares in total.The results will keep you informed of your accounts and all you need to have is an empty space for your spread sheet, some peaceful time and a calculator.
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