Ch.

Personal Investment Accounts (Lecture-3)

Date: 08/06/2020
T.Y.B.Com- Semester-V
Mahatma Night Degree College of Arts and Commerce, Chembur

April 2006
Banglore Investment hold 1200 -6% Debentures of Rs.100 each in MINERVA Ltd. as on 1 st April 2004 at a cost of
Rs.1,40,000. Interest is payable on 30th June and 31st December each year. Other details are as under:
Date Particulars
1-6-2004 400 debentures are purchased cum-interest at Rs.40,800
1-11-2004 400 debentures are purchased ex-interest at Rs.38,400
30-11-2004 600 debentures are sold cum-interest for Rs.64,500
31-12-2004 800 debentures are sold ex-interest for Rs.77,300
Prepare Investment Account valuing closing balance on 31-3-2005 at cost or market price whichever is lower. The debentures
are quoted at par on 31-3-2005.

Solution:
In the Books of Banglore Investments
6% Debentures in Minerva Ltd. Acc for the year ended 31st March, 2005
Date Particulars FV Int. Cost Date Particulars FV Int. Cost
1/4/04 To Balance b/d 1,20,000 1,800 1,40,000 30/6/04 By Bank -- 4,800 --
1/6/04 To Bank 40,000 1,000 39,800 30/11/04 By Bank 60,000 1,500 63,000
1/11/04 To Bank 40,000 800 38,400 30/11/04 By Profit & Loss Acc -- -- 2,460
31/12/04 By Bank -- 4,200 --
31/03/05 To P & L Acc -- 7,800 -- 31/12/04 By Bank 80,000 -- 77,300
31/12/04 By P&L Acc -- -- 9,980
31/03/05 By Balance c/d 60,000 900 60,000
31/03/05 By P & L Acc -- -- 5,460
2,00,000 11,400 2,18,200 2,00,000 11,400 2,18,200
Working Note:

1. Calculation of Interest and cost on 1/6/04 2. Calculation of Interest and cost on 30/11/04
Cum interest price 40,800 Cum interest price 64,500
Less: Interest (40,000 X 6% X 5/12)1,000 Less: Interest (60,000 X 6% X 5/12)1,500
Cost 39,800 Cost 63,000
3. calculation of Profit/ Loss on sale on 30/11/04 4. Calculation of P/L on sale on 31/12/04
2,18,200-NIL/2,00,000—NIL X 60,000= 65,460 2,18,200- 65,460/2,00,000-60,000 X 80,000 = 87,280
Less: Sale 63,000 Less: Sale 77,300
Loss 2,460 Loss 9,980

October 2007
st
Mr. Mandar holds as on 1 April, 2005 Rs.75,000 (Cost price Rs.78,000) 6% Government Securities as Investment on which
interest is payable half yearly on 30th June and 31st December every year. The following transactions took place during the
accounting year ended 31st March 2006.
Purchases:
i. On 1-5-2005 face value Rs.30,000 @98 cum-interest
ii. On 1-11-2005 face value Rs.45,000 @101 ex-interest
Sales:
i. On 1-8-2005 face value Rs.36,000 @97 cum-interest
ii. On 1-2-2006 face value Rs.24,000 @102 ex-interest
Market price of investment at 1% discount on 31st March, 2006
Write up Investment Account closing it on 31st March, 2006 in the book of Mr. Mandar Investment are to be valued at cost or at
Market Value whichever is less. (Apply AS 13)
Solution:
In the Books of Mr. Mandar
6% Government Securities Acc for the year ended 31st March, 2006
Date Particulars FV Int. Cost Date Particulars FV Int. Cost
01/04/05 To Balance b/d 75,000 1,125 78,000 30/06/05 By Bank -- 3,150 --
01/05/05 To Bank 30,000 600 28,800 01/08/05 By Bank 36,000 180 34,740
01/11/05 To Bank 45,000 900 45,450 01/08/05 By P & L Acc -- -- 1,877
01/02/06 To P & L Acc -- -- 136 31/12/05 By Bank -- 3,420 --
01/02/06 By Bank 24,000 120 24,480
31/03/06 To P & L Acc -- 5,595 -- 31/03/06 By Balance c/d 90,000 1,350 89,100
31/03/06 By P & L Acc -- -- 2,189
1,50,000 8,220 1,52,386 1,50,000 8,220 1,52,386

Working Note:

1. Calculation of Interest and Cost on 01/05/05 2. Calculation of Interest and Cost on 01/08/05
Cum Interest Price (300 X 98) 29,400 Cum Interest price (360 X 97) 34,920
Less: Interest (30,000 X 6% X 4/12) 600 Less: Interest (36,000 X 6% X 1/12) 180
Cost 28,800 Cost 34,740
3. Calculation of P/L on 01/08/05 4. Calculation of Profit/ Loss on 01/02/06
1,06,800-NIL/1,05,000-NIL X 36,000 = 36,617 1,52,250-36,617/ 1,50,000- 36,000 X 24,000= 24,344
Less: Sale 34,740 Less: Sale 24,480
Loss 1,877 Profit 136

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