When entering a buy transaction for a stock, should the amount be negative?

Question

I'm setting up a 401K account and entering historic data so that I have the price paid for each fractional share of stock purchased. I have been entering the amount paid as a positive number, but after the transaction screen is closed, it is showing the amount paid as a negative number and the total balance as a negative number. Is that what it should be?

John_in_NC · Accepted Answer

Yes, the Buy (or any buy for that matter) will show as a negative amount reducing your cash balance in that account.

You will have to show how the cash got into the account to make this buy: for a 401k, that usually is employee/employer contributions. People don't think of a 401k as having a cash balance because most don't display one, but $ does need to be moved over to purchase funds on your behalf.

The ideal way is to split out your paycheck to show the cash being transferred over to your 401k account, but this may not be ideal in your case. You might wish to simply create an adjusting cash entry to compensate for the subsequent buys when you are done to zero out your balance.

If you are downloading transactions for your 401k, the automatic placeholder should automatically create a cash adjustment for you to make sure the final running balance is zero.

Now, the holdings you bought (mutual fund, etc.) are what will create the positive value in your 401k account.