12

Investment Accounts

Question 1
On 1st April, 2008, Mr. Neel purchased 5,000 equity shares of ` 100 each in X Ltd. @ ` 120
each from a Broker, who charged 2% brokerage. He incurred ½% as cost of shares transfer
stamps. On 31st January, 2009, Bonus was declared in the ratio of 1:2. Before and after the
record date of bonus shares, the shares were quoted at ` 175 per share and ` 90 per share
respectively. On 31st March, 2009, Mr. Neel sold bonus shares to a broker, who charged 2%
brokerage.
Show the Investment Account in the books of Mr. Neel, who held the shares as current assets
and closing value of investments shall be made at cost or Market value, whichever is lower.
(8 Marks June,2009)(PCC)
Answer
Investment Account in the books of Mr. Neel
For the year ended 31st March, 2009
(Scrip: Equity Shares of X Ltd.)
Dr. Cr.
Date Particulars Nominal Cost (` ) Date Particulars Nominal Cost (` )
Value (` ) Value (` )
1.4.08 To Bank A/c 5,00,000 6,15,000 31.3.09 By Bank A/c
(W.N.1) (W.N.2) 2,50,000 2,20,500
31.01.09 To Bonus 31.3.09 By Balance c/d
Shares 2,50,000 - (W.N.4) 5,00,000 4,10,000
31.03.09 To Profit and - 15,500
Loss A/c
(W.N.3)
7,50,000 6,30,500 7,50,000 6,30,500

© The Institute of Chartered Accountants of India

 Investment Accounts 12.2

Working Notes:
1. Calculation of cost of equity shares purchased on 1.4.08
1
= 5,000 × ` 120 + 2% of ` 6,00,000 + % of ` 6,00,000 = ` 6,15,000
2
2. Calculation of profit proceeds of equity shares sold on 31.3.09
= 2,500 × ` 90 – 2% of ` 2,25,000 = ` 2,20,500
3. Calculation of profit on sale of bonus shares on 31.3.09
= Sale proceeds – Average cost
⎛ 2,50,000 ⎞
= 2,20,500 – 2,05,000 i.e. ⎜ 6,15,000 × ⎟ = ` 15,500
⎝ 7,50,000 ⎠
4. Valuation of equity shares on 31.3.09
5,00,000
Cost = 6,15,000 × = ` 4,10,000
7,50,000
Market value = 5,000 shares × ` 90 = ` 4,50,000
Closing Balance has been valued at ` 4,10,000 i.e. at cost which is lower than the
market value.
Question 2
Mr. T purchased 1,000 nos. 10% debentures of ` 100 each on 1st April, 2009 at ` 96 cum-
interest, the previous interest date being 31st December, 2008. Compute cost of investment.
(2 Marks, June, 2009) (PCC)
Answer
`
Total amount payable 1,000 × 96 = 96,000
Less: Interest included in the price for January, February and
10 3
March i.e. 1,00,000 × × = 2,500
100 12
Cost of the Investment 93,500

Question 3
Mr. X purchased 1,000, 6% Government Bonds of ` 100 each on 31st January, 2009 at ` 95
each. Interest is payable on 30th June and 31st December. The price quoted is cum interest.
Journalise the transaction. (2 Marks) (May, 2010) (IPCC)

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 12.3 Accounting

Answer
Journal Entry
Date Particulars Amount Amount
(Dr.) (Cr.)
` `
31st Jan., 2009 Investment A/c Dr. 94,500
6 1 Dr. 500
Interest A/c (` 1,00,000 × × )
100 12
To Bank A/c 95,000
(Being purchase of 1,000, 6% Government
bonds of ` 100 each at ` 95 each cum
interest)
Question 4
Gaama Investment Company holds 1,000, 15% debentures of ` 100 each in Beta Industries
Ltd. as on April 1, 2009 at a cost of ` 1,05,000. Interest is payable on
June, 30 and December, 31 each year.
On May 1, 2009, 500 debentures are purchased cum-interest at ` 53,500. On November 1,
2009, 600 debentures are sold ex-interest at ` 57,300. On November 30, 2009, 400
debentures are purchased ex-interest at ` 38,400. On December 31, 2009, 400 debentures
are sold cum-interest for ` 55,000.
Prepare the investment account showing value of holdings on March 31, 2010 at cost, using
FIFO method. (6 Marks, May, 2010) (IPCC)
Answer
In the books of Gaama Investments Ltd.
Investment Account (15% Debentures in Beta Industries Ltd.)
Date Particulars Nominal Interest Cost Date Particulars Nominal Interest Cost
Value Value
` ` ` ` ` `
1.04.09 To Balance b/d 30.06.09 By Bank A/c
(W.N.1) 1,00,000 3,750 1,05,000 (W.N.3) - 11,250 -
1.05.09 To Bank A/c 1.11.09 By Bank A/c
(W.N.2) 50,000 2,500 51,000 (W.N.4) 60,000 3,000 57,300
30.11.09 To Bank A/c 1.11.09 By Profit & Loss A/c
(W.N.5) 40,000 2,500 38,400 (W.N.10) 5,700
31.12.09 To Profit & Loss A/c 10,000 31.12.09 By Bank A/c (W.N. 6 40,000 3,000 52,000
(W.N.12) & 7)

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 Investment Accounts 12.4

31.03.10 To Profit & Loss A/c - 18,625 31.12.09 By Bank A/c - 6,750 -
(W.N.8)
31.03.10 By Bank A/c (W.N.9
& 10) 90,000 3,375 89,400
1,90,000 27,375 2,04,400 1,90,000 27,375 2,04,400

Working Notes:
15 3
1. Accrued interest as on 1.4.09 = ` 1,00,000 × × = Rs.3,750
100 12
15 4
2. Accrued interest = ` 50,000 × × = Rs.2,500
100 12
Cost of investment for purchase on 1.5.09 = ` 53,500 – ` 2,500 = ` 51,000

15 6
3. Interest received = ` 1,50,000 × × = Rs.11,250
100 12
15 4
4. Accrued interest = ` 60,000 × × = Rs.3,000
100 12
15 5
5. Accrued interest = ` 40,000 × × = Rs.2,500
100 12
15 6
6. Accrued interest = ` 40,000 × × = Rs.3,000
100 12
7. Sale price of investment on 31.12.09 = ` 55,000 – ` 3,000 = ` 52,000
15 6
8. Accrued interest = ` 90,000 × × = Rs.6,750
100 12
15 3
9. Accrued interest = ` 90,000 × × = Rs.3,375
100 12
10. Cost of investment as on 31.3.10= ` 51,000 + ` 38,400 = ` 89,400
11. Loss on debentures sold on 1.11.2009:
Sales price of debentures ` 57,300

` 1,05,000
Less: Cost of investment sold = × 600 = (` 63,000)
1,000
Loss on sale ` 5,700)

© The Institute of Chartered Accountants of India

 12.5 Accounting

12. Profit on debentures sold on 31.12.2009:

Sales price of debentures ` 52,000

Rs.1,05,000
Less: Cost of investment sold = × 400 = (` 42,000)
1,000
Profit on sale ` 10,000

Question 5
H purchased 500 equity shares of ` 100 each in the ABC Company Limited for ` 62,500
inclusive of brokerage and stamp duty. Some years later the company decided to capitalise its
profit and to issue to the holders of equity shares one equity share as Bonus for every equity
share held by them. Prior to capitalization, the shares of ABC Company Limited were quoted
at ` 175 per share. After the capitalization, the shares were quoted at ` 92.50 per share. H
sold the Bonus shares and received ` 90 per share. Show Investment A/c in H’s books on
average cost basis as per AS 13. (5 Mark November, 2010) (IPCC)
Answer
In the books of H
Investment Account (Equity Shares of ABC Co. Ltd.)
Particulars Face Cost Particulars Face Cost
Value Value
` ` ` `
∗
To Balance b/d 50,000 62,500 By Bank A/c 50,000 45,000
To Bonus Shares A/c 50,000 - By Balance c/d 50,000 31,250
To Profit & Loss A/c 13,750 (Refer W.N.2)
(Refer W.N. 1)
(Profit on sale)
1,00,000 76,250 1,00,000 76,250
Working Note:
1. Calculation of profit on sale of bonus shares:
`
Sales price of bonus shares 45,000

∗
Bonus issue was made some years later to the purchase of initial 500 equity shares.

© The Institute of Chartered Accountants of India

 Investment Accounts 12.6

⎛ 62,500 ⎞
Less: Average cost of shares sold ⎜ x 50,000 ⎟ = (31,250)
⎝ 1,00,000 ⎠
Profit 13,750
2. Value of closing investment:
⎛ 50,000 ⎞
Market value of shares ⎜ × 92.50 ⎟ = 46,250
⎝ 100 ⎠
Cost price of shares (W.N. 1) = 31,250
Value of investment will be least of market value or average cost price, i.e. ` 31,250
Question 6
On 1st April, 2010, Rajat has 50,000 equity shares of P Ltd. at a book value of ` 15 per share
(face value ` 10 each). He provides you the further information:
(1) On 20th June, 2010, he purchased another 10,000 shares of P Ltd. at ` 16 per share.
(2) On 1st August, 2010, P Ltd. issued one equity bonus share for every six shares held by
the shareholders.
(3) On 31st October, 2010, the directors of P Ltd. announced a right issue which entitle the
holders to subscribe three shares for every seven shares at ` 15 per share.
Shareholders can transfer their rights in full or in part.
Rajat sold 1/3rd of entitlement to Umang for a consideration of ` 2 per share and subscribe the
rest on 5th November, 2010.
You are required to prepare Investment A/c in the books of Rajat for the year ending
31st March, 2011. (5 Marks May, 2011) (IPCC)
Answer
In the books of Rajat
Investment Account
(Equity shares in P Ltd. )
Date Particulars No. of Amount Date Particulars No. of Amount
shares (`) shares (`)
1.4.10 To Balance b/d 50,000 7,50,000 31.3.11 By Balance c/d 90,000 12,10,000
20.6.10 To Bank A/c 10,000 1,60,000 (Bal. fig.)
1.8.10 To Bonus 10,000 -
issue (W.N.1)
5.11.10 To Bank A/c
(right shares)

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 12.7 Accounting

(W.N.4) 20,000 3,00,000

90,000 12,10,000 90,000 12,10,000

Working Notes:
50,000 + 10,000
(1) Bonus shares = = 10,000 shares
6
50,000 + 10,000 + 10,000
(2) Right shares = × 3 = 30,000 shares
7
1
(3) Sale of rights = 30,000 shares× × ` 2= ` 20,000 to be credited to Profit & Loss A/c as
3
per AS 13
2
(4) Rights subscribed = 30,000 shares × × ` 15 = ` 3,00,000
3
Question 7
Mr. Brown has made following transactions during the financial year 2011-12:
Date Particulars
01.05.2011 Purchased 24,000 12% Bonds of ` 100 each at ` 84 cum-interest.
Interest is payable on 30th September and 31st March every year.
15.06.2011 Purchased ` 1,50,000 equity shares of ` 10 each in Alpha Limited for
` 25 each through a broker, who charged brokerage @ 2%.
10.07.2011 Purchased 60,000 equity shares of ` 10 each in Beeta Limited for
` 44 each through a broker, who charged brokerage @2%.
14.10.2011 Alpha Limited made a bonus issue of two shares for every three shares held.
31.10.2011 Sold 80,000 shares in Alpha Limited for ` 22 each.
01.01.2012 Received 15% interim dividend on equity shares of Alpha Limited.
15. 01.2012 Beeta Limited made a right issue of one equity share for every four
shares held at ` 5 per share. Mr. Brown exercised his option for 40% of
his entitlements and sold the balance rights in the market at
` 2.25 per share.
01.03.2012 Sold 15,000 12% Bonds at ` 90 ex-interest.
15.03.2012 Received 18% interim dividend on equity shares of Beeta Limited.

© The Institute of Chartered Accountants of India

 Investment Accounts 12.8

Interest on 12% Bonds was duly received on due dates. Prepare separate investment account
for 12% Bonds, Equity Shares of Alpha Limited and Equity Shares of Beeta Limited in the
books of Mr. Brown for the year ended on 31st March, 2012. (8 Marks, May 2012) (IPCC)
Answer
In the books of Mr. Brown
12% Bonds for the year ended 31st March, 2012
Date Particulars No. Income Amount Date Particulars No. Income Amount
` ` ` `
2011 May, To Bank A/c 24,000 24,000 19,92,000 2011 Sept. By Bank- - 1,44,000
1 30 Interest
2012 To P & L A/c - - 1,05,000 2012 Mar. By Bank 15,000 75,000 13,50,000
March 31 (W.N.1) 1 A/c
To P & L A/c 2,49,000 2012 Mar. By Bank- 54,000
31 Interest
By Balance
c/d
(W.N.2) 9,000 - 7,47,000
24,000 2,73,000 20,97,000 24,000 2,73,000 20,97,000

Investment in Equity shares of Alpha Ltd. for the year ended 31st March, 2012
Date Particulars No. Income Amount Date Particulars No. Income Amount
` ` ` `
2011 To Bank A/c 1,50,000 -- 38,25,000 2011 By Bank A/c 80,000 - 17,60,000
June 15 Oct. 31
Oct. 14 To Bonus 1,00,000 - - 2012 By Bank A/c - 2,55,000
Issue Jan. 1 dividend
(1,50,000/3 x2)
2012 To P & L A/c 5,36,000 March 31 By Balance 1,70,000 - 26,01,000
Mar. 31 (W.N.3) c/d
(W.N.4)
To P & L A/c
2,55,000
2,50,000 2,55,000 43,61,000 2,50,000 2,55,000 43,61,000

Investment in Equity shares of Beeta Ltd. for the year ended 31st March, 2012
Date Particulars No. Income Amount Date Particulars No. Income Amount
` ` ` `
2011 To Bank A/c 60,000 -- 26,92,800 2012 By Bank – - 1,18,800
July 10 Mar. 15 dividend
2012 To Bank A/c 6,000 - 30,000 March By Balance
Jan. 15 (W.N. 5) 31 c/d
(bal.fig.) 66,000 - 27,22,800
March To P & L A/c
31 - 1,18,800 -
66,000 1,18,800 27,22,800 66,000 1,18,800 27,22,800

Working Notes:
1. Profit on sale of 12% Bond
Sales price ` 13,50,000

© The Institute of Chartered Accountants of India

 12.9 Accounting

19,92,000
Less: Cost of bond sold = x 15,000 (` 12,45,000)
24,000
Profit on sale ` 1,05,000
2. Closing balance as on 31.3.2012 of 12 % Bond
19,92,000
x 9,000 = ` 7,47,000
24,000
3. Profit on sale of equity shares of Alpha Ltd.
Sales price ` 17,60,000
38,25,000
Less: Cost of bond sold = x 80,000 (` 12,24,000)
2,50,000
Profit on sale ` 5,36,000
4. Closing balance as on 31.3.2012 of equity shares of Alpha Ltd.
38,25,000
x 1,70,000 = ` 26,01,000
2,50,000
5. Calculation of right shares subscribed by Beeta Ltd.
60,000 shares
Right Shares = x 1= 15,000 shares
4
Shares subscribed by Mr. Brown = 15,000 x 40%= 6,000 shares
Value of right shares subscribed = 6,000 shares @ ` 5 per share = ` 30,000
6. Calculation of sale of right entitlement by Beeta Ltd.
No. of right shares sold = 15,000 - 6,000 = 9,000 shares
Sale value of right = 9,000 shares x ` 2.25 per share = ` 20,250
Note: As per para 13 of AS 13, sale proceeds of rights is to be credited to P & L A/c.
Question 8
On 01-04-2011, Mr. T. Shekharan purchased 5,000 equity shares of ` 100 each in V. Ltd. @
` 120 each from a broker, who charged 2% brokerage. He incurred 50 paisa per ` 100 as
cost of shares transfer stamps. On 31-01-2012 bonus was declared in the ratio of 1 : 2. Before
and after the record date of bonus shares, the shares were quoted at ` 175 per share and
` 90 per share respectively. On 31-03-2012 Mr. T. Shekharan sold bonus shares to a broker,
who charged 2% brokerage.

© The Institute of Chartered Accountants of India

 Investment Accounts 12.10

Show the Investment Account in the books of T. Shekharan, who held the shares as Current
Assets and closing value of investments shall be made at cost or market value whichever is
lower. (8 Marks, November 2012) (IPCC)
Answer
In the books of T. Shekharan
Investment Account
for the year ended 31st March, 2012
(Script: Equity Shares of V Ltd.)
Date Particulars Nominal Cost Date Particulars Nominal Cost
Value Value
(` ) (` ) (` ) (` )
1.4.2011 To Bank A/c 5,00,000 6,15,000 31.3.2012 By Bank A/c 2,50,000 2,20,500
(W.N.1) (W.N.2)
31.1.2012 To Bonus 2,50,000 − 31.3.2012 By Balance 5,00,000 4,10,000
31.3.2012 To shares Profit c/d
and (W.N.4)
Loss A/c
(W.N.3) 15,500
7,50,000 6,30,500 7,50,000 6,30,500

Working Notes:
1. Cost of equity shares purchased on 1.4.2011
= Cost + Brokerage + Shares of transfer stamps
= 5,000 × ` 120 + 2% of ` 6,00,000 + ½% of ` 6,00,000 = ` 6,15,000
2. Sale proceeds of equity shares sold on 31st March, 2012
= Sales price – Brokerage = 2,500 × ` 90 – 2% of ` 2,25,000 = ` 2,20,500.
3. Profit on sale of bonus shares on 31st March, 2012
= Sales proceeds – Average cost
Sales proceeds = ` 2,20,500
Average cost = ` [6,15,000 × 2,50,000/7,50,000] = ` 2,05,000
Profit = ` 2,20,500 – ` 2,05,000= ` 15,500.
4. Valuation of equity shares on 31st March, 2012
Cost = ` [6,15,000 × 5,00,000/7,50,000]= ` 4,10,000 i.e ` 82 per share
Market Value = 5,000 shares × ` 90 = ` 4,50,000
Closing stock of equity shares has been valued at ` 4,10,000 i. e cost being lower than
the market value.

© The Institute of Chartered Accountants of India

 12.11 Accounting

Question 9
In 2011, M/s. Wye Ltd. issued 12% fully paid debentures of ` 100 each, interest being payable
half yearly on 30th September and 31st March of every accounting year.
On 1st December, 2012, M/s. Bull & Bear purchased 10,000 of these debentures at ` 101
cum-interest price, also paying brokerage @ 1% of cum-interest amount of the purchase. On
1st March, 2013 the firm sold all of these debentures at ` 106 cum-interest price, again paying
brokerage @ 1 % of cum-interest amount.
Prepare Investment Account in the books of M/s. Bull & Bear for the period 1st December,
2012 to 1st March, 2013. (5 Marks, May 2013) (IPCC)
Answer
In the books of M/s Bull & Bear
Investment Account
for the period from 1st December 2012 to 1st March, 2013
(Scrip: 12% Debentures of M/s. Wye Ltd.)
Date Particulars Nominal Interest Cost Date Particulars Nominal Interest Cost
Value (` ) Value (` )
(` ) (` )

1.12.2012 To Bank A/c 10,00,000 20,000 10,00,100 1.03.2013 By Bank A/c 10,00,000 50,000 9,99,400
(W.N.1) (W.N.2)
1.3.2013 To Profit & loss - 1.3.2013 By Profit &
A/c 30,000 loss A/c 700
10,00,000 50,000 10,00,100 10,00,000 50,000 10,00,100

Working Notes:
(i) Cost of 12% debentures purchased on 1.12.2012 `
Cost Value (10,000 × ` 101) = 10,10,000
Add: Brokerage (1% of ` 10,10,000) = 10,100
Less: Cum Interest (10,000 x 100 x12% x 2/12) = ( 20,000)
Total = 10,00,100
(ii) Sale proceeds of 12% debentures sold on 31st March, 2013 `
Sales Price (10,000 × ` 106) = 10,60,000
Question 10
On 01-05-2012, Mr. Mishra purchased 800 equity shares of 10 each in Fillco Ltd. @ ` 50 each
from a broker who charged 5%. He incurred 20 paisa per 100 as cost of shares transfer
stamps. On 31-10-2012, bonus was declared in the ratio 1 : 4. The shares were quoted at
` 110 and ` 60 per share before and after the record date of bonus shares respectively. On

© The Institute of Chartered Accountants of India

 Investment Accounts 12.12

30-11-2012, Mr. Mishra sold the bonus shares to a broker who charged 5%. You are required
to prepare Investment Account in the books of Mr. Mishra for the year ending 31-12-2012 and
closing value of lnvestment shall be made at cost or market value whichever is lower.
(4 Marks, November 2013) (IPCC)
Answer
In the books of Mr. Mishra
Investment Account for the year ended 31st Dec. 2012
(Scrip: Equity Shares of Fillco Ltd.)
Date Particulars Nominal Cost Date Particulars Nominal Cost
Value Value
(` ) (`) (` ) (` )
1.5.2012 To Bank A/c 8,000 42,080 30.11.12 By Bank A/c 2,000 11,400
31.10.2012 To Bonus 2,000 − 31.12.12 By Balance 8,000 33,664
shares c/d
31.12.2012 To Profit & − 2,984
loss A/c
10,000 45,064 10,000 45,064

Working Notes:
(i) Cost of equity shares purchased on 1.5.2012 = 800 × ` 50 + 5% of ` 40,000 + .002 of
` 40,000 = ` 42,080.
(ii) Sale proceeds of equity shares sold on 30.11.2012 = 200 × ` 60 – 5% of ` 12,000 = ` 11,400
(iii) Profit on sale of bonus shares on 30.11.12
= Sales proceeds – Average cost
Sales proceeds = ` 11,400
42,080
Average cost =` x 2,000 = ` 8,416
10,000
Profit = ` 11,400 – ` 8,416 = ` 2,984
(iv) Valuation of equity shares on 31st Dec., 2012
Cost = (` 42,080/10,000 x 8,000) = ` 33,664
Market Value = 800 × ` 60 = ` 48,000
Closing balance has been valued at ` 33,664 being lower than the market value
Less: Brokerage (1% of ` 10,60,000) = (10,600)
Less: Cum Interest (10,000 x 100 x12% x 5/12) = (50,000)
Total = 9,99,400

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 12.13 Accounting

Question 11
Smart Investments made the following investments in the year 2013-14:
12% State Government Bonds having face value ` 100
Date Particulars
01.04.2013 Opening Balance (1200 bonds) book value of ` 126,000
02.05.2013 Purchased 2,000 bonds @ ` 100 cum interest
30.09.2013 Sold 1,500 bonds at ` 105 ex interest
Interest on the bonds is received on 30th June and 31st Dec. each year.
Equity Shares of X Ltd.
15.04.2013 Purchased 5,000 equity shares @ ` 200 on cum right basis
Brokerage of 1% was paid in addition (Face Value of shares ` 10)
03.06.2013 The company announced a bonus issue of 2 shares for every 5
shares held.
16.08.2013 The company made a rights issue of 1 share for every 7 shares
held at ` 250 per share.
The entire money was payable by 31.08.2013.
22.8.2013 Rights to the extent of 20% was sold @ ` 60. The remaining
rights were subscribed.
02.09.2013 Dividend @ 15% for the year ended 31.03.2013 was received on
16.09.2013
15.12.2013 Sold 3,000 shares @ ` 300. Brokerage of 1% was incurred extra.
15.01.2014 Received interim dividend @ 10% for the year 2013-14
31.03.2014 The shares were quoted in the stock exchange @ ` 220
Prepare Investment Account in the books of Smart Investments. Assume that the average cost
method is followed. (8 Marks, IPCC May, 2014)

© The Institute of Chartered Accountants of India

 Answer
In the books of Smart Investments
12% Govt. Bonds for the year ended 31st March, 2014
Date Particulars Nos. Incom Amount Date Particulars Nos. Income Amount
e
1.4.13 To Opening 1,200 3,600 1,26,000 30.6.13 By Bank A/c (Interest) - 19,200 -
balance b/d (3,200 x 100 x 12%
x 6/12)
2.5.13 To Bank A/c 2,000 8,000 1,92,000 30.9.13 By Bank A/c 1,500 4,500 1,57,500
31.3.14 To P & L A/c 27,400 31.12.13 By Bank A/c (Interest) - 10,200 -
(Interest) (1,700 x 100 x 12%

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x 6/12)
To P & L A/c 8,437.50 31.3.14 By Bal. c/d 1,700 5,100 1,68,937.50
(Profit on Sale)
3,200 39,000 3,26,437.50 3,200 39,000 3,26,437.50
Investments in Equity shares of X Ltd. for year ended 31.3.2014
Date Particulars Nos. Income Amount Date Particulars Nos. Income Amount
15.4.13 To Bank A/c 5,000 10,10,000 By Bank (Dividend) - - 7,500
3.6.13 To Bonus Issue 2,000 - - 16.9.13 By Bank (Sale) 3,000 - 8,91,000
31.8.13 To Bank A/c 800 2,00,000 15.12.13 By Bank (interim dividend) 4,800
31.3.14 To P & L A/c 4,800 4,28,500 15.1.14 By Bal. c/d 4,800 7,40,000
Investment Accounts

31.3.14
7800 4,800 16,38,500 7800 4,800 16,38,500
12.14
 12.15 Accounting

Working Notes:
1. Profit on sale of bonds on 30.9.13
= Sales proceeds – Average cost
Sales proceeds = ` 1,57,500
Average cost = ` [(1,26,000+1,92,000) × 1,500/3,200] = 1,49,062.50
Profit = 1,57,500– ` 1,49,062.50=` 8,437.50
2. Valuation of bonds on 31st March, 2014
Cost = ` 3,18,000/3,200 x1,700 = 1,68,937.50
3. Cost of equity shares purchased on 15/4/2013
= Cost + Brokerage
= (5,000 ×` 200) + 1% of (5,000 × ` 200) = ` 10,10,000
4. Sale proceeds of equity shares on 15/12/2013
= Sale price – Brokerage
= (3,000 ×` 300) – 1% of (3,000 × ` 300) = ` 8,91,000.
5. Profit on sale of shares on 15/12/2013
= Sales proceeds – Average cost
Sales proceeds = ` 8,91,000
Average cost = ` [(10,10,000+2,00,000-7,500) × 3,000/7,800]
= ` [12,02,500 × 3,000/7,800] = 4,62,500
Profit = ` 8,91,000 – ` 4,62,500=` 4,28,500.
6. Valuation of equity shares on 31st March, 2014
Cost =` [12,02,500 × 4,800/7,800] = ` 7,40,000
Market Value = 4,800 shares ×` 220 =` 10,56,000
Closing stock of equity shares has been valued at ` 7,40,000 i.e. cost being lower
than the market value.
Note:
1. It is presumed that no dividend is received on bonus shares as bonus shares are
declared on 3.6.2013 and dividend pertains to the year ended 31.03.2013.
2. The amount of dividend for the period, for which shares were not held by the investor,
has been treated as capital receipt.

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