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Page 1
Investment Accounts
Q-1 Mr. Harsh provides the following details relating to his holding m 10% debentures (face value of ` 100
each) of Exe Ltd., held as current assets:
1.4.2018 opening balance - 12,500 debentures, cost ` 12,25,000
1.6.2018 purchased 9,000 debentures @ ` 98 each ex-interest
1.11.2018 purchased 12,000 debentures @ ` 115 each cum-in terest
31.1.2019 sold 13,500 debentures @ ` 110 each cum-interest
31.3.2019 Market value of debentures @ ` 115 each
Due dates of interest are 30
th
June and 31
st
December. Brokerage at 1% is to be paid for each transaction.
Mr, Harsh closes his books on 31.3.2019. Show investment account as it would appear in his books
assuming FIFO method is followed.
Ans. Investment Account of Mr. Harsh
for the year ending on 31-3-2019
(Scrip: 10% Debentures of Exe Limited)
(Interest Payable on 30th June and 31st December)
Date Particulars Nominal Interest Cost Date Particulars Nominal Interest Cost
Value Value
` ` ` ` ` `
1.4.18 To Balance
b/d 12,50,000 31,250 12,25,000 30.6.18 By Bank 21,500 x 100 - 1,07,500 -
x 10% x 1/2
1.6.18 To Bank
(ex-Interest)
(W.N.1) 9,00,000 37,500 8,90,820 31.12.19 By Bank
33,500 x 100
x10% x 1/2 1,67,500
1.11.18 To Bank
(cum-Interest)
(W.N.2) 12,00,000 40,000 13,53,800 31.1.19 By Bank (W.N.3) 13,50,000 11,250 14,58,900
31.1.19 To Profit &
Loss A/c
(W.N.3) 1,34,920 31.3.19 By Balance c/d 20,00,000 50,000 21,45,640
(W.N.4) -
31.3.19 To Profit &
Loss A/c
(Bal. fig.) _________ 2,27,500 ________ _________ _________ _________
33,50,000 3,36,250 36,04,540 33,50,000 3,36,250 36,04,540
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Page 2
Investment Accounts
Q-1 Mr. Harsh provides the following details relating to his holding m 10% debentures (face value of ` 100
each) of Exe Ltd., held as current assets:
1.4.2018 opening balance - 12,500 debentures, cost ` 12,25,000
1.6.2018 purchased 9,000 debentures @ ` 98 each ex-interest
1.11.2018 purchased 12,000 debentures @ ` 115 each cum-in terest
31.1.2019 sold 13,500 debentures @ ` 110 each cum-interest
31.3.2019 Market value of debentures @ ` 115 each
Due dates of interest are 30
th
June and 31
st
December. Brokerage at 1% is to be paid for each transaction.
Mr, Harsh closes his books on 31.3.2019. Show investment account as it would appear in his books
assuming FIFO method is followed.
Ans. Investment Account of Mr. Harsh
for the year ending on 31-3-2019
(Scrip: 10% Debentures of Exe Limited)
(Interest Payable on 30th June and 31st December)
Date Particulars Nominal Interest Cost Date Particulars Nominal Interest Cost
Value Value
` ` ` ` ` `
1.4.18 To Balance
b/d 12,50,000 31,250 12,25,000 30.6.18 By Bank 21,500 x 100 - 1,07,500 -
x 10% x 1/2
1.6.18 To Bank
(ex-Interest)
(W.N.1) 9,00,000 37,500 8,90,820 31.12.19 By Bank
33,500 x 100
x10% x 1/2 1,67,500
1.11.18 To Bank
(cum-Interest)
(W.N.2) 12,00,000 40,000 13,53,800 31.1.19 By Bank (W.N.3) 13,50,000 11,250 14,58,900
31.1.19 To Profit &
Loss A/c
(W.N.3) 1,34,920 31.3.19 By Balance c/d 20,00,000 50,000 21,45,640
(W.N.4) -
31.3.19 To Profit &
Loss A/c
(Bal. fig.) _________ 2,27,500 ________ _________ _________ _________
33,50,000 3,36,250 36,04,540 33,50,000 3,36,250 36,04,540
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Working Notes:
1. Purchase of debentures on 1.6.18
Interest element = 9,000 x 100 x 10% x 5 /12 = ` 37,500
Investment element = (9,000 x 98) + [1%(9,000 x 98)] = ` 8,90,820
2. Purchase of debentures on 1.11.2018
Interest element = 12,000 x 100 x 10% x 4 /12 = ` 40,000
Investment element = 12,000 X 115 X 101% less 40,000 = ` 13,53,800
3. Profit on sale of debentures as on 31.1.19
`
Sales price of debentures (13,500 x ` 110) 14,85,000
Less: Brokerage @ 1% (14,850)
14,70,150
Less: Interest (1,35,000/ 12) (11,250)
14,58,900
Less: Cost of Debentures [(12,25,000 + (890820 X 1,00,000/9,00,000)] (13,23,980)
Profit on sale 1,34,920
4. Valuation of closing balance as on 31.3.2019:
Market value of 20,000 Debentures at ` 115 = ` 23,00,000
Cost of
8,000 Debentures = 8,90,820/ 9,000 X 8,000 = 7,91,840
12,000 Debentures = 13,53,800
Total 21,45,640
Value at the end is ` 21,45,640, i.e., which is less than market value of ` 23,00,000.
Q-2 Following transaction of Nisha took Place during the financil year 2017-18 :
1st April, 2017 Puchased ` 9,000 8% bonds of ` 100 each at ` 80.50 cuminterset. Intersest. Interest
is payable on 1st November and 1st May.
1st May, 2017 Received half year’s interset on 8% bonds.
10 July, 2017 Puchased 12,000 equilty shares of Rs.10 each in Moon Limited for ` 44 each through
a broker, who charged brokerage @2%
1st October 2017 Sold 2,250 8% bonds at ` 81 Ex-interest.
1st November, 2017 Received half year’s interest on 8% bonds.
15th January, 2018 Moon Limited made a right issue of one equity share for every four Equity shares
helf at ` 5 per share. Nisha exercised the option for 4% of her entitlements and
sold the balance right int he makret at ` 2.25 per share.
15th March, 2018 Received 18% interm dvidend on equity shares of Moon Limited.
Prepare separate investment account for 8% bonds and equity shares of Moon Limited in the books of Nisha
for the year ended on 31st March, 2018. Assume that the average cost method is followed.
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Page 3
Investment Accounts
Q-1 Mr. Harsh provides the following details relating to his holding m 10% debentures (face value of ` 100
each) of Exe Ltd., held as current assets:
1.4.2018 opening balance - 12,500 debentures, cost ` 12,25,000
1.6.2018 purchased 9,000 debentures @ ` 98 each ex-interest
1.11.2018 purchased 12,000 debentures @ ` 115 each cum-in terest
31.1.2019 sold 13,500 debentures @ ` 110 each cum-interest
31.3.2019 Market value of debentures @ ` 115 each
Due dates of interest are 30
th
June and 31
st
December. Brokerage at 1% is to be paid for each transaction.
Mr, Harsh closes his books on 31.3.2019. Show investment account as it would appear in his books
assuming FIFO method is followed.
Ans. Investment Account of Mr. Harsh
for the year ending on 31-3-2019
(Scrip: 10% Debentures of Exe Limited)
(Interest Payable on 30th June and 31st December)
Date Particulars Nominal Interest Cost Date Particulars Nominal Interest Cost
Value Value
` ` ` ` ` `
1.4.18 To Balance
b/d 12,50,000 31,250 12,25,000 30.6.18 By Bank 21,500 x 100 - 1,07,500 -
x 10% x 1/2
1.6.18 To Bank
(ex-Interest)
(W.N.1) 9,00,000 37,500 8,90,820 31.12.19 By Bank
33,500 x 100
x10% x 1/2 1,67,500
1.11.18 To Bank
(cum-Interest)
(W.N.2) 12,00,000 40,000 13,53,800 31.1.19 By Bank (W.N.3) 13,50,000 11,250 14,58,900
31.1.19 To Profit &
Loss A/c
(W.N.3) 1,34,920 31.3.19 By Balance c/d 20,00,000 50,000 21,45,640
(W.N.4) -
31.3.19 To Profit &
Loss A/c
(Bal. fig.) _________ 2,27,500 ________ _________ _________ _________
33,50,000 3,36,250 36,04,540 33,50,000 3,36,250 36,04,540
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Working Notes:
1. Purchase of debentures on 1.6.18
Interest element = 9,000 x 100 x 10% x 5 /12 = ` 37,500
Investment element = (9,000 x 98) + [1%(9,000 x 98)] = ` 8,90,820
2. Purchase of debentures on 1.11.2018
Interest element = 12,000 x 100 x 10% x 4 /12 = ` 40,000
Investment element = 12,000 X 115 X 101% less 40,000 = ` 13,53,800
3. Profit on sale of debentures as on 31.1.19
`
Sales price of debentures (13,500 x ` 110) 14,85,000
Less: Brokerage @ 1% (14,850)
14,70,150
Less: Interest (1,35,000/ 12) (11,250)
14,58,900
Less: Cost of Debentures [(12,25,000 + (890820 X 1,00,000/9,00,000)] (13,23,980)
Profit on sale 1,34,920
4. Valuation of closing balance as on 31.3.2019:
Market value of 20,000 Debentures at ` 115 = ` 23,00,000
Cost of
8,000 Debentures = 8,90,820/ 9,000 X 8,000 = 7,91,840
12,000 Debentures = 13,53,800
Total 21,45,640
Value at the end is ` 21,45,640, i.e., which is less than market value of ` 23,00,000.
Q-2 Following transaction of Nisha took Place during the financil year 2017-18 :
1st April, 2017 Puchased ` 9,000 8% bonds of ` 100 each at ` 80.50 cuminterset. Intersest. Interest
is payable on 1st November and 1st May.
1st May, 2017 Received half year’s interset on 8% bonds.
10 July, 2017 Puchased 12,000 equilty shares of Rs.10 each in Moon Limited for ` 44 each through
a broker, who charged brokerage @2%
1st October 2017 Sold 2,250 8% bonds at ` 81 Ex-interest.
1st November, 2017 Received half year’s interest on 8% bonds.
15th January, 2018 Moon Limited made a right issue of one equity share for every four Equity shares
helf at ` 5 per share. Nisha exercised the option for 4% of her entitlements and
sold the balance right int he makret at ` 2.25 per share.
15th March, 2018 Received 18% interm dvidend on equity shares of Moon Limited.
Prepare separate investment account for 8% bonds and equity shares of Moon Limited in the books of Nisha
for the year ended on 31st March, 2018. Assume that the average cost method is followed.
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Ans. In the books of Nisha
8% Bonds for the year ended 31st March, 2018
Date Particular No. Income Amount Date Particular No. Income Amount
` ` ` `
2017 1 May By Bank Interset - 36,000 -
1 April, To Bank A/c 9,000 30,000 6,94,500 2017
Oct. 1
2018 To P & L A/c - - 8,625 1 Oct. By Bank A/c 2,250 7,500 1,82,250
March (W.N.1) 2017
31
To P & L A/c 40,500 1 Nov. By bank Interest 27,000
2018
2018 By Balance c/d
Mar.31 (W.N.2)
6,750 - 5,20,875
9,000 70,500 7,03,125 9,000 70,500 7,03,125
Investment In Equity shares of Moon Ltd. for the year ended 31st March, 2018
Date Particular No. Income Amount Date Particular No. Income Amount
` ` ` `
2017 To Bank 12,000 -- 5,38,560 2018 By Bank- - 23,760
A/c March dividend
15 *
2018 To Bank 1,200 - 6,000 March By Balance
Jan. 15 A/c 31 c/d
(W.N.3) (bal.fig) 13,200 - 5,44,560
March To P & L
31 A/c - 23,760
13,200 23,760 5,44,560 13,200 23,760 5,44,560
* Considering that dividend was received on right share also.
Working Notes:
1. Profit on sale of 8% Bonds
Sales price ` 1,82,250
Less: Cost of bond sold = 6,94,500/9,000x 2,250 (` 1,73,625)
Profit on sale ` 8,625
2. Closing balanceas on 31.3.2018 of 8% Bonds
6,94,500/ 9,000 x 6,750= ` 5,20,875
3. Calculation of right shares subscribed by Moon Ltd.
Right Shares = 12,000/ 4 x 1= 3,000 shares
Shares subscribed by Nisha = 3,000 x 40%= 1,200 shares
Value of right shares subscribed = 1,200 shares @ ` 5 per share = ` 6,000
4. Calculation of sale of rightentitlement by Moon Ltd.
No. of right shares sold = 3,000 -1,200 = 1,800 rights for ` 4,050
Note: As per para 13 of AS 13, sale proceeds of rights are to be credited to P & L A/c.
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Page 4
Investment Accounts
Q-1 Mr. Harsh provides the following details relating to his holding m 10% debentures (face value of ` 100
each) of Exe Ltd., held as current assets:
1.4.2018 opening balance - 12,500 debentures, cost ` 12,25,000
1.6.2018 purchased 9,000 debentures @ ` 98 each ex-interest
1.11.2018 purchased 12,000 debentures @ ` 115 each cum-in terest
31.1.2019 sold 13,500 debentures @ ` 110 each cum-interest
31.3.2019 Market value of debentures @ ` 115 each
Due dates of interest are 30
th
June and 31
st
December. Brokerage at 1% is to be paid for each transaction.
Mr, Harsh closes his books on 31.3.2019. Show investment account as it would appear in his books
assuming FIFO method is followed.
Ans. Investment Account of Mr. Harsh
for the year ending on 31-3-2019
(Scrip: 10% Debentures of Exe Limited)
(Interest Payable on 30th June and 31st December)
Date Particulars Nominal Interest Cost Date Particulars Nominal Interest Cost
Value Value
` ` ` ` ` `
1.4.18 To Balance
b/d 12,50,000 31,250 12,25,000 30.6.18 By Bank 21,500 x 100 - 1,07,500 -
x 10% x 1/2
1.6.18 To Bank
(ex-Interest)
(W.N.1) 9,00,000 37,500 8,90,820 31.12.19 By Bank
33,500 x 100
x10% x 1/2 1,67,500
1.11.18 To Bank
(cum-Interest)
(W.N.2) 12,00,000 40,000 13,53,800 31.1.19 By Bank (W.N.3) 13,50,000 11,250 14,58,900
31.1.19 To Profit &
Loss A/c
(W.N.3) 1,34,920 31.3.19 By Balance c/d 20,00,000 50,000 21,45,640
(W.N.4) -
31.3.19 To Profit &
Loss A/c
(Bal. fig.) _________ 2,27,500 ________ _________ _________ _________
33,50,000 3,36,250 36,04,540 33,50,000 3,36,250 36,04,540
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Working Notes:
1. Purchase of debentures on 1.6.18
Interest element = 9,000 x 100 x 10% x 5 /12 = ` 37,500
Investment element = (9,000 x 98) + [1%(9,000 x 98)] = ` 8,90,820
2. Purchase of debentures on 1.11.2018
Interest element = 12,000 x 100 x 10% x 4 /12 = ` 40,000
Investment element = 12,000 X 115 X 101% less 40,000 = ` 13,53,800
3. Profit on sale of debentures as on 31.1.19
`
Sales price of debentures (13,500 x ` 110) 14,85,000
Less: Brokerage @ 1% (14,850)
14,70,150
Less: Interest (1,35,000/ 12) (11,250)
14,58,900
Less: Cost of Debentures [(12,25,000 + (890820 X 1,00,000/9,00,000)] (13,23,980)
Profit on sale 1,34,920
4. Valuation of closing balance as on 31.3.2019:
Market value of 20,000 Debentures at ` 115 = ` 23,00,000
Cost of
8,000 Debentures = 8,90,820/ 9,000 X 8,000 = 7,91,840
12,000 Debentures = 13,53,800
Total 21,45,640
Value at the end is ` 21,45,640, i.e., which is less than market value of ` 23,00,000.
Q-2 Following transaction of Nisha took Place during the financil year 2017-18 :
1st April, 2017 Puchased ` 9,000 8% bonds of ` 100 each at ` 80.50 cuminterset. Intersest. Interest
is payable on 1st November and 1st May.
1st May, 2017 Received half year’s interset on 8% bonds.
10 July, 2017 Puchased 12,000 equilty shares of Rs.10 each in Moon Limited for ` 44 each through
a broker, who charged brokerage @2%
1st October 2017 Sold 2,250 8% bonds at ` 81 Ex-interest.
1st November, 2017 Received half year’s interest on 8% bonds.
15th January, 2018 Moon Limited made a right issue of one equity share for every four Equity shares
helf at ` 5 per share. Nisha exercised the option for 4% of her entitlements and
sold the balance right int he makret at ` 2.25 per share.
15th March, 2018 Received 18% interm dvidend on equity shares of Moon Limited.
Prepare separate investment account for 8% bonds and equity shares of Moon Limited in the books of Nisha
for the year ended on 31st March, 2018. Assume that the average cost method is followed.
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Ans. In the books of Nisha
8% Bonds for the year ended 31st March, 2018
Date Particular No. Income Amount Date Particular No. Income Amount
` ` ` `
2017 1 May By Bank Interset - 36,000 -
1 April, To Bank A/c 9,000 30,000 6,94,500 2017
Oct. 1
2018 To P & L A/c - - 8,625 1 Oct. By Bank A/c 2,250 7,500 1,82,250
March (W.N.1) 2017
31
To P & L A/c 40,500 1 Nov. By bank Interest 27,000
2018
2018 By Balance c/d
Mar.31 (W.N.2)
6,750 - 5,20,875
9,000 70,500 7,03,125 9,000 70,500 7,03,125
Investment In Equity shares of Moon Ltd. for the year ended 31st March, 2018
Date Particular No. Income Amount Date Particular No. Income Amount
` ` ` `
2017 To Bank 12,000 -- 5,38,560 2018 By Bank- - 23,760
A/c March dividend
15 *
2018 To Bank 1,200 - 6,000 March By Balance
Jan. 15 A/c 31 c/d
(W.N.3) (bal.fig) 13,200 - 5,44,560
March To P & L
31 A/c - 23,760
13,200 23,760 5,44,560 13,200 23,760 5,44,560
* Considering that dividend was received on right share also.
Working Notes:
1. Profit on sale of 8% Bonds
Sales price ` 1,82,250
Less: Cost of bond sold = 6,94,500/9,000x 2,250 (` 1,73,625)
Profit on sale ` 8,625
2. Closing balanceas on 31.3.2018 of 8% Bonds
6,94,500/ 9,000 x 6,750= ` 5,20,875
3. Calculation of right shares subscribed by Moon Ltd.
Right Shares = 12,000/ 4 x 1= 3,000 shares
Shares subscribed by Nisha = 3,000 x 40%= 1,200 shares
Value of right shares subscribed = 1,200 shares @ ` 5 per share = ` 6,000
4. Calculation of sale of rightentitlement by Moon Ltd.
No. of right shares sold = 3,000 -1,200 = 1,800 rights for ` 4,050
Note: As per para 13 of AS 13, sale proceeds of rights are to be credited to P & L A/c.
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Q-3 Mr. Vijay entered into the following transactions of purchase and sale of equity shares of JP Power Ltd.
The shares have paid up value of ` 10 per share.
Date No.of Shares Terms
01.01.2016 600 Buy @ Rs.20 per share
15.03.2016 900 Buy @ Rs.25 per share
20.05.2016 1000 Buy@ Rs.23 per share
25.07.2016 2500 Bonus Shares received
20.12.2016 1500 Sale @ Rs.22 per share
01.02.2017 1000 Sale @ Rs.24 per share
Addition information:
(1) On 15.09.2016 dividend @ ` 3 per share was received for the year ended 31.03.2016.
(2) On 12.11.2016 company made a right issue of equity shares in the ratio of one share for five shares held
on payment of ` 20 per share. He subscribed to 60% of the shares and renounced the remaining shares
on receipt of the premium of ` 3 per share.
(3) Shares are to be valued on weighted average cost basis.
You are required to prepare Investment Account for the year ended 31.03.2016 and 31.03.2017.
Ans. Investment in Equity Shares of JP Power Ltd.
Date Particular No. Dividend Amount Date Particular No. Dividend Amount
01.01.16 To Bank A/c 600 12,000 31.3.16 By Balance c/d 1,500 34,500
15.3.16 To Bank A/c 900 22,500
1,500 34,500 1,500 34,500
1.4.16 To Balance b/d 1,500 34,500 15.9.16 By Bank dividend 4,500 3,000
20.5.16 To Bank A/c 1,000 23,000 20.12.16 By Bank 1,500 33,000
25.7.16 To Bonus shares 2,500 - 1.2.17 By Bank 1,000 24,000
12.11.16 To Bank A/c 600 12,000 31.3.17 By Balance c/d 3,100 36,812.50*
20.12.16 To P&L A/c
(profit on sale) 15,187,50*
1.2.17 To P&L A/c 12,125
(profit on sale)
31.3.17 To P&L A/c 4,500
(divdend)
5,600 4,500 96,812,50 5,600 4,500 96,812.50
Working Notes :
1. Calculation of Weighted average cost of equity shres
600 shares puchased at Rs.12,000
900 shares purchased at Rs.22,500
1,000 shares purchased at Rs.23,000
2,500 shares at nil cost
600 right shares purchased at Rs.12,000
Total cost of 5,600 shares is Rs.66,500 [Rs. 69,500 less Rs.3,000 (pre-acquisition dividend received on
1,000 shares purchased on 20.5.17].
Hence, weighted average cost per share will be considered as Rs.11.875 per share (66,500/ 5,600).
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Page 5
Investment Accounts
Q-1 Mr. Harsh provides the following details relating to his holding m 10% debentures (face value of ` 100
each) of Exe Ltd., held as current assets:
1.4.2018 opening balance - 12,500 debentures, cost ` 12,25,000
1.6.2018 purchased 9,000 debentures @ ` 98 each ex-interest
1.11.2018 purchased 12,000 debentures @ ` 115 each cum-in terest
31.1.2019 sold 13,500 debentures @ ` 110 each cum-interest
31.3.2019 Market value of debentures @ ` 115 each
Due dates of interest are 30
th
June and 31
st
December. Brokerage at 1% is to be paid for each transaction.
Mr, Harsh closes his books on 31.3.2019. Show investment account as it would appear in his books
assuming FIFO method is followed.
Ans. Investment Account of Mr. Harsh
for the year ending on 31-3-2019
(Scrip: 10% Debentures of Exe Limited)
(Interest Payable on 30th June and 31st December)
Date Particulars Nominal Interest Cost Date Particulars Nominal Interest Cost
Value Value
` ` ` ` ` `
1.4.18 To Balance
b/d 12,50,000 31,250 12,25,000 30.6.18 By Bank 21,500 x 100 - 1,07,500 -
x 10% x 1/2
1.6.18 To Bank
(ex-Interest)
(W.N.1) 9,00,000 37,500 8,90,820 31.12.19 By Bank
33,500 x 100
x10% x 1/2 1,67,500
1.11.18 To Bank
(cum-Interest)
(W.N.2) 12,00,000 40,000 13,53,800 31.1.19 By Bank (W.N.3) 13,50,000 11,250 14,58,900
31.1.19 To Profit &
Loss A/c
(W.N.3) 1,34,920 31.3.19 By Balance c/d 20,00,000 50,000 21,45,640
(W.N.4) -
31.3.19 To Profit &
Loss A/c
(Bal. fig.) _________ 2,27,500 ________ _________ _________ _________
33,50,000 3,36,250 36,04,540 33,50,000 3,36,250 36,04,540
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Working Notes:
1. Purchase of debentures on 1.6.18
Interest element = 9,000 x 100 x 10% x 5 /12 = ` 37,500
Investment element = (9,000 x 98) + [1%(9,000 x 98)] = ` 8,90,820
2. Purchase of debentures on 1.11.2018
Interest element = 12,000 x 100 x 10% x 4 /12 = ` 40,000
Investment element = 12,000 X 115 X 101% less 40,000 = ` 13,53,800
3. Profit on sale of debentures as on 31.1.19
`
Sales price of debentures (13,500 x ` 110) 14,85,000
Less: Brokerage @ 1% (14,850)
14,70,150
Less: Interest (1,35,000/ 12) (11,250)
14,58,900
Less: Cost of Debentures [(12,25,000 + (890820 X 1,00,000/9,00,000)] (13,23,980)
Profit on sale 1,34,920
4. Valuation of closing balance as on 31.3.2019:
Market value of 20,000 Debentures at ` 115 = ` 23,00,000
Cost of
8,000 Debentures = 8,90,820/ 9,000 X 8,000 = 7,91,840
12,000 Debentures = 13,53,800
Total 21,45,640
Value at the end is ` 21,45,640, i.e., which is less than market value of ` 23,00,000.
Q-2 Following transaction of Nisha took Place during the financil year 2017-18 :
1st April, 2017 Puchased ` 9,000 8% bonds of ` 100 each at ` 80.50 cuminterset. Intersest. Interest
is payable on 1st November and 1st May.
1st May, 2017 Received half year’s interset on 8% bonds.
10 July, 2017 Puchased 12,000 equilty shares of Rs.10 each in Moon Limited for ` 44 each through
a broker, who charged brokerage @2%
1st October 2017 Sold 2,250 8% bonds at ` 81 Ex-interest.
1st November, 2017 Received half year’s interest on 8% bonds.
15th January, 2018 Moon Limited made a right issue of one equity share for every four Equity shares
helf at ` 5 per share. Nisha exercised the option for 4% of her entitlements and
sold the balance right int he makret at ` 2.25 per share.
15th March, 2018 Received 18% interm dvidend on equity shares of Moon Limited.
Prepare separate investment account for 8% bonds and equity shares of Moon Limited in the books of Nisha
for the year ended on 31st March, 2018. Assume that the average cost method is followed.
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Ans. In the books of Nisha
8% Bonds for the year ended 31st March, 2018
Date Particular No. Income Amount Date Particular No. Income Amount
` ` ` `
2017 1 May By Bank Interset - 36,000 -
1 April, To Bank A/c 9,000 30,000 6,94,500 2017
Oct. 1
2018 To P & L A/c - - 8,625 1 Oct. By Bank A/c 2,250 7,500 1,82,250
March (W.N.1) 2017
31
To P & L A/c 40,500 1 Nov. By bank Interest 27,000
2018
2018 By Balance c/d
Mar.31 (W.N.2)
6,750 - 5,20,875
9,000 70,500 7,03,125 9,000 70,500 7,03,125
Investment In Equity shares of Moon Ltd. for the year ended 31st March, 2018
Date Particular No. Income Amount Date Particular No. Income Amount
` ` ` `
2017 To Bank 12,000 -- 5,38,560 2018 By Bank- - 23,760
A/c March dividend
15 *
2018 To Bank 1,200 - 6,000 March By Balance
Jan. 15 A/c 31 c/d
(W.N.3) (bal.fig) 13,200 - 5,44,560
March To P & L
31 A/c - 23,760
13,200 23,760 5,44,560 13,200 23,760 5,44,560
* Considering that dividend was received on right share also.
Working Notes:
1. Profit on sale of 8% Bonds
Sales price ` 1,82,250
Less: Cost of bond sold = 6,94,500/9,000x 2,250 (` 1,73,625)
Profit on sale ` 8,625
2. Closing balanceas on 31.3.2018 of 8% Bonds
6,94,500/ 9,000 x 6,750= ` 5,20,875
3. Calculation of right shares subscribed by Moon Ltd.
Right Shares = 12,000/ 4 x 1= 3,000 shares
Shares subscribed by Nisha = 3,000 x 40%= 1,200 shares
Value of right shares subscribed = 1,200 shares @ ` 5 per share = ` 6,000
4. Calculation of sale of rightentitlement by Moon Ltd.
No. of right shares sold = 3,000 -1,200 = 1,800 rights for ` 4,050
Note: As per para 13 of AS 13, sale proceeds of rights are to be credited to P & L A/c.
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Q-3 Mr. Vijay entered into the following transactions of purchase and sale of equity shares of JP Power Ltd.
The shares have paid up value of ` 10 per share.
Date No.of Shares Terms
01.01.2016 600 Buy @ Rs.20 per share
15.03.2016 900 Buy @ Rs.25 per share
20.05.2016 1000 Buy@ Rs.23 per share
25.07.2016 2500 Bonus Shares received
20.12.2016 1500 Sale @ Rs.22 per share
01.02.2017 1000 Sale @ Rs.24 per share
Addition information:
(1) On 15.09.2016 dividend @ ` 3 per share was received for the year ended 31.03.2016.
(2) On 12.11.2016 company made a right issue of equity shares in the ratio of one share for five shares held
on payment of ` 20 per share. He subscribed to 60% of the shares and renounced the remaining shares
on receipt of the premium of ` 3 per share.
(3) Shares are to be valued on weighted average cost basis.
You are required to prepare Investment Account for the year ended 31.03.2016 and 31.03.2017.
Ans. Investment in Equity Shares of JP Power Ltd.
Date Particular No. Dividend Amount Date Particular No. Dividend Amount
01.01.16 To Bank A/c 600 12,000 31.3.16 By Balance c/d 1,500 34,500
15.3.16 To Bank A/c 900 22,500
1,500 34,500 1,500 34,500
1.4.16 To Balance b/d 1,500 34,500 15.9.16 By Bank dividend 4,500 3,000
20.5.16 To Bank A/c 1,000 23,000 20.12.16 By Bank 1,500 33,000
25.7.16 To Bonus shares 2,500 - 1.2.17 By Bank 1,000 24,000
12.11.16 To Bank A/c 600 12,000 31.3.17 By Balance c/d 3,100 36,812.50*
20.12.16 To P&L A/c
(profit on sale) 15,187,50*
1.2.17 To P&L A/c 12,125
(profit on sale)
31.3.17 To P&L A/c 4,500
(divdend)
5,600 4,500 96,812,50 5,600 4,500 96,812.50
Working Notes :
1. Calculation of Weighted average cost of equity shres
600 shares puchased at Rs.12,000
900 shares purchased at Rs.22,500
1,000 shares purchased at Rs.23,000
2,500 shares at nil cost
600 right shares purchased at Rs.12,000
Total cost of 5,600 shares is Rs.66,500 [Rs. 69,500 less Rs.3,000 (pre-acquisition dividend received on
1,000 shares purchased on 20.5.17].
Hence, weighted average cost per share will be considered as Rs.11.875 per share (66,500/ 5,600).
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2. It has been considered that no dividend was received on bonus shares as the dividend pertains to the
year ended 31st March, 2016.
3. Calculation of right shares subscribed by Vijay
Right Shares (considering that right shares have been granted on Bonus shares also) = 5,000/ 5 x 1= 1,000
shares
Shares subscribed = 1,000 x 60%= 600 shares
Value of right shares subscribed = 600 shares @ Rs. 20 per share = Rs.12,000
Calculation of sale of right renouncement
No. of right shares sold = 1,000 x 40% = 400 shares
Sale value of right = 400 shares x Rs.3 per share = Rs.1,200
Note: As per para 13 of AS 13, sale proceeds of rights is to be credited to P & L A/c.
4. Profit on sale of equity shares
As on 20.12.16
Sales price (1,500 shares at Rs.22) 33,000.00
Less: Cost of shares sold (1,500 x Rs 11.875) (17,812.50)
Profit on sale 15,187.50
As on 1.2.17
Sales price (1,000 shares at Rs.24) 24,000
Less: Cost of shares sold (1,000 x Rs. 11.875) 11,875
Profit on sale 12,125
Balance of 3,100 shares as on 31.3.17 will be valued at ` 36,812.50 (at rate of Rs.11.875 per share).
Q-4 Akash Ltd. had 4,000 equity share of X Limited, at a book value of Rs. 15 per share (face value of Rs. 10
each) on 1st April 2018. On 1st September 2018, Akash Ltd. acquired 1,000 equity shares of X Limited at
a premium of Rs. 4 per share. X Limited announced a bonus and right issue for existing share holders.
The terms of bonus and right issue were -
(1) Bonus was declared, at the rate of two equity shares for every five equity shares held on 30th
September, 2018.
(2) Right shares are to be issued to the existing shareholders on 1st December, 2018. The company
issued two right shares for every seven shares held at 25% premium. No dividend, was payable on
these shares. The whole sum being payable by 31st December, 2018.
(3) Existing shareholders were entitled to transfer their rights to outsiders, either wholly or in part.
(4) Akash Ltd. exercised its option under the issue for 50% of its entitlements and sold the remaining
rights for Rs. 8 per share.
(5) Dividend for the year ended 31st March 2018, at the rate of 20% was declared by the company and
received by Akash Ltd., on 20th January 2019.
(6) On 1st February 2019, Akash Ltd., sold half of its share holdings at a premium of Rs. 4 per share.
(7) The market price of share on 31.03.2019 was Rs. 13 per share.
You are required to prepare the Investment Account of Akash Ltd. for the year ended 31st March, 2019
and determine the value of shares held on that date assuming the investment as current investment.
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FAQs on Important Questions & Answers: Investment Accounts - Accounting for CA Intermediate (Old Scheme)
| 1. What is the CA Intermediate exam? |  |
Ans. The CA Intermediate exam is the second level of the Chartered Accountancy course conducted by the Institute of Chartered Accountants of India (ICAI). It is an important milestone for aspiring chartered accountants and consists of two groups, each containing four subjects.
| 2. What are investment accounts? | |
Ans. Investment accounts are financial accounts held by individuals or institutions for the purpose of investing in various financial instruments such as stocks, bonds, mutual funds, etc. These accounts allow individuals to grow their wealth and generate income through capital appreciation, dividends, or interest.
| 3. What are the types of investment accounts? | |
Ans. There are several types of investment accounts, including individual retirement accounts (IRAs), 401(k) accounts, brokerage accounts, and custodial accounts. Each type of account has its own features, benefits, and restrictions, catering to different investment goals and preferences.
| 4. How to choose the right investment account? | |
Ans. Choosing the right investment account depends on various factors such as investment goals, risk tolerance, time horizon, and tax implications. It is important to consider these factors and evaluate the features and fees associated with different types of accounts before making a decision. Consulting with a financial advisor can also be helpful in selecting the most suitable investment account.
| 5. What are the key considerations for managing investment accounts? | |
Ans. Managing investment accounts requires careful monitoring and decision-making. Some key considerations include regularly reviewing investment performance, rebalancing the portfolio to maintain desired asset allocation, staying updated on market trends and economic indicators, and periodically reassessing investment goals and risk tolerance. It is also important to stay informed about any changes in tax laws or regulations that may impact investment decisions.
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