INVESTMENT ACCOUNTS

1. MEANING OF INVESTMENT:
Investments are assets held by an enterprise for earning income by way
of dividends, interest and rentals, for capital appreciation, or for other
benefits to the investing enterprise.
The accounting for investments is governed by the provisions of AS-13.
Example: Inv . in shares d securities .
Inv in Gold Silver etc. ,
,

Inv in Inv in business

property ,
.
etc .

2. COST OF INVESTMENT:
Investment acquired shall be initially recognised at COST.
Cme ! : Inv .

acquired for Cmh consideration : -

Purchase price : ✗ ✗ ✗

It) F- ( stamp
xp
-

for purchase : ✗✗ ✗
duty ,
Comm . etc)

Fxx

cone ? : Inv .
acquired by exchange of other omets : -

Cost = fair value

of asset given of fair value of
Inv acquired
. .

Care ?: Inv acquired by issue

of shares
by a co : -

Fair value fair value

Cost :

of Inv acq
.
. 0
? of
shares issued .

3. RECURRING INCOME FROM INVESTMENTS:

Int income d Div . Income tofd to PIL
d d
accrues on accrues when
time basis declared / paid
by the co
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.
 INVESTMENT ACCOUNTS
4. MEASUREMENT OF INVESTMENT IN BALANCE SHEET:
Classification of Investment

-
CURRENT INVESTMENT -
LONG TERM INVESTMENT
d &

Inv . which are held with Inv . other than

an intention to sell within Current inv .

12 months from the dahl b

readily valued
of purchase and are at cost .

realis able .
However , if there is

tr permanent decline in

Valued at -
lost or Fmv
; lower value ,
then it shall be

d provided for 1PM .

Any diff
.
shall be charged
to PIL .

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 INVESTMENT ACCOUNTS
5. DISPOSAL OF INVESTMENT:
On disposal of an investment, the difference between the carrying
amount and the disposal proceeds, net of expenses is recognised in the
profit and loss statement.

PIL on sale =
[Net selling Price to
carrying Amt .
]
Bank INSP )
A/c -
Dr

PIL Alc -
Dr Closs)
to Inv .
Afc ( Carrying Amt)
TO PIL All profit )
If a part of investment is sold, then the carrying amount of investment sold
can be determined using cost formulas like FIFO or weighted average.
( Priority 1)

6. ACCOUNTING FOR INVESTMENT IN SECURITIES:

A separate Investment Account should be made for each scrip purchased.
Types of securities

Fixed income bearing Variable income bearing

☐ securities ☐ securities
d d
f. Bonds , Debentures f-
g. Equity shares
g.
. .

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 INVESTMENT ACCOUNTS
7. INVESTMENT A/c - FIXED INCOME BEARING SECURITIES:
a) Format:
Dr. Cr.

t.I.FI
Date Particulars FV Cost Int. Date Particulars FV Cost Int.

b) Cost of Investment acquired:

Price Quotations
& d

En int price com int price

to a
Price for securities total amt .

payable
excluding Interest including interest

Cum Int price =

[ F- R int price ☒ Inherent from last
IPD till date of
d
d purity
cost d
Total ant of
payable investment Expense

* f-
xp
.
like
Brokerage etc .

given in % shall be
applied
as
follows : -

(a) it basis % that

given
=)
apply on
price
to if nothing mentioned :) apply % on quotation
given .

Journal
Inv Afc - Dr LEN int price including exp ) .
✗✗

Int on Inv Afc - pr ( int ) ✗✗

To Bank At Clum Int

price ) ✗y

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 INVESTMENT ACCOUNTS
c) Periodic Interest income:
date :) Int recognised
µ On
of purchase exp
. to be

(2) On every IPD Int Inc . to be recognised

Hart IPD to current IPD)

On date sale =) Int Inc to recognised

(3) of .
be
date sale)
11Mt IPD to
of

trfd PILAK
* the net Int Income
for the
year will be to

d) Interest accrued but not due:

a) Only when IPD d Year end date are different .

b) Op bat
of Int accrued =) Dr bae of Int cot
-
.
. . .

c) U bat Int accrued =) Shown Inr cot

of
.
on on

the Cr .
side 'm U bat .
.

" "
Int accrued : last IPD to
year end

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 INVESTMENT ACCOUNTS
e) Sale of investment:

Pll on safe :
En int SP : ✗✗

e)
selling exp
✗¥
-
.

Cost
of Inv . Sold ✗✗ =) FIFO or weighted
Ay .

*
if cum Int sp is deduct inherent d show
given income ,

it on a
separate .

f) Closing balance of Investment:

✓ a
lushent Inv .

longterm Inv .

I
b
valued at
cost or fmri value at cost

lower
( Mal .

fig )
d
if FMV is lower ,
the diff -
in inv Ak
shall be trfd
to PILAK

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 INVESTMENT ACCOUNTS
7. INVESTMENT A/c - VARIABLE INCOME BEARING SECURITIES:
a) Format:
Dr. Cr.

III.
Date Particulars FV Cost Div. Date Particulars FV Cost Div.

b) Cost of Equity shares acquired:

Purchase price = ✗ ✗

F) F-
xp for porch :#
lost : XI

c) Dividend received:

F-
-
Pre acquisition dividend -
Post acquisition dividend
b w
kharida is Saal treated on income

but dividend mil dtrfd to PIL

raha hai last a
year
ka Bank Alc Dr ✗✗
-

d To Dividend All
✗✗
Reduced CPK >
from cost
of Inv .

d
Bank Ale - M ✗ ✗

to Investment AKXY

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 INVESTMENT ACCOUNTS
d) Bonus shares received on investment:
* shares recd without. consideration .

Increase
'

No
of with Nil
-

* .
shares : cost

* When the shares are sold ,

calculate PIL using
weighted avg .
cost method .

* Bonus ratio : 2 :3 : two bonus sh .

for every
3 Shares
held .

e) Right shares:
issued
* New shares
by co .
at concessional rate .

Investor has
* two
-
options
← w
Purchase the Renounce the
shares right
d d
Purchase
of Inr .
* Renouncement money
recd . is an income

d shall be trfd to PIL

( working
-
none)

None ① Cost
of Inv .

for renounce e = Renouncement

#
Amt paid
money paid
.

to Co .

(2) Exception to the treatment

of renown c. money ! .

if original shares were purchased on cum right basis and

recd
the ex
right price of shares falls then the renown
money
.
.

Shall be 1st applied to reduce the cost

of Inv .

CA AVINASH SANCHETI and any excess shall be trfd to NAVIN CLASSES

pµ .
 INVESTMENT ACCOUNTS
e) Sale of investment:
PIL on sale
=

✗ ✗ ✗
Net
selling price :

Cost
e)
of Inv sold :
( XXX)

Pll on sale :)

*
If part inv . is sold =) Calculate cost using weighted
OR FIFO
avg .
.

f) Closing balance of Investment:

Same as above .

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 INVESTMENT ACCOUNTS
8. RECLASSIFICATION OF INVESTMENT:

-
Current to Long term Long term to Current
-
d d

value for reclassification Value for reclassification

lost on Fmv on dahl of cost or
carrying anti

reclassification ; as the cone may

whichever is lower .
be .

Conversion Deb shares

of
* to :
Eq
-
.
.

be
(a) On date of conversion
,
Int income shall recognised
from last IPD till date omen deb.com#hed
'

on on -

deb converted
(b) lost
of Eq shares recd =
Carrying amt
of .

in M
Inv .

Eq Sh .
Afc -
✗ ✗

Inv in Def ✗✗
To A/c

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