@winnie-lim
"When borrow the stock:
Entry 1: Use Expense Transaction
Line 1: Investment Account 5000
Line 2: Shares Short Sell 5000"
Line 1 is correct just make sure it's an other current asset (OCA) account. Line 2 should be -$5,000 and is a liability account since you owe the broker. The Expense transaction should total $0 since you did not pay for the shares. At this point, you have $5,000 in your OCA Investment Account and $5,000 in your Shares Short Sell liability account
"When sell the stock:
Entry 2: Use Bank Deposit
Line 1: Investment Account 5000
Line 2: Other Income 200"
The bank deposit amount will equal the sale price of the stock. Line 1 is correct. Line 2 is not $200, it is the difference between $5,000 and what you sold them for. If you sold them for $5,100, line 2 is $100 to other income. If you sold them for $4,900, line 2 is -$100 to other income. The $200 gain is recorded when you return the shares in entry #4. At this point, you have the cash from the sale of the stock, the OCA Investment Account is $0 (or reduced by $5,000) and the difference was recorded as gain/loss.
"When repurchase the stock:
Entry 3: Use Expense Entry
Line 1: Investment Account 4800"
Yes, that's correct.
"When shares are returned:
Entry 4: Use Expense Entry
Line 1: Investment Account -4800
Line 2: Shares Short Sell 5000
Lime 3: Other Income -200"
You got it. Just to confirm, Other Income is recorded as -$200 but it is actually a $200 gain. That's because this is an Expense transaction in QB but I suspect you know that. Nice work.
