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Investment Accounting
1. On 1st December, 2015, M/s Blue & Black purchased, 20,000 12% fully paid debentures
of Rs. 100 each at Rs. 105 cum interest price, also paying brokerage @ 1% of cum interest
amount of the purchase. On 1st March, 2016, the firm sold all these debentures at Rs. 110
cum-interest price, again paying brokerage @ 1% of cum interest amount. Prepare
Investment Account in the books of M/s. Blue & Black for the period 1st December, 2015
to 1st March, 2016. Interest being payable half yearly on 30th September and 31st March
of every accounting year.

2. Mr. Chatur had 12% Debentures of Face Value Rs. 100 of M/s. Unnati Ltd. as current
investments.
He provides the following details relating to the investments.
1-4-2014 Opening balance 4000 debentures costing Rs. 98 each
1-6-2014 Purchased 2000 debentures @ Rs. 120 cum interest
1-9-2014 Sold 3000 debentures @ Rs. 110 cum interest
1-12-2014 Sold 2000 debentures @ Rs. 105 ex interest
31-1-2015 Purchased 3000 debentures @ Rs. 100 ex interest
31-3-2015 Market value of the investments Rs. 105 each
Interest due dates are 30th June and 31st December.
Mr. Chatur closes his books on 31-3-2015. He incurred 2% brokerage for all his
transactions.
Show investment account in the books of Mr. Chatur assuming FIFO method is followed.

3. On 1st April Rambo ltd purchased 12% Debentures in Mohan Ltd.for Rs.7,50,000 Cum-
interest. The face Value of these debentures were Rs.6,00,000. Interest on debentures falls
due for payment on 30th June and 31st December. Compute the cost of acquisition of
debentures.

4. Mr.Sharma purchased 1,000, 6% Government Bonds of Rs.100 each on 31st January, 2009
at Rs.95 each. Interest is payable on 30th june and 31st December. The price quoted in
Cum.interest. Journalise the transaction.

5. Gamma Investment company holds 1,000, 15% Debentures of Rs.100 each in Beta
Industries Ltd. as on April 1, 2009 at a cost Rs.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 Rs.53,500. On November
1, 2009, 600 Debentures are sold ex-interest at Rs.57,300. On November 30,2009, 400
debentures are purchased ex-interest at Rs.38,400. On December 31 2009, 400 debentures
are sold Cum-Interest for Rs.55,000.
Prepare the investment account showing the value of holding on march 31,2010 at cost,
using FIFO Method.
6. On 1st January 1997, Singh had 20,000 equity shares in X ltd. Face value of a shares was
Rs.10 each but their book value was rs.16 per share. On 1st June 1997, Singh purchased
5,000 more equity shares in the company at a premium of Rs.4 per share.

Rajan Adhikari, FCA Investment Accounting CAP -II

On 30th June, 1997, the directors of X ltd announced a bonus and rights issue. Bonus was
declared at the rate of one equity share for every five shares held and these shares were
received on 2nd August, 1997.
The terms of the right issues were:
a. Right Shares to be issued to the existing holders on 10th August 1997.
b. Rights issue would entitle the holders to subscribe to additional equity shares in the
company at the rate of one share per every three held at Rs.15 per share-the whole
sum being payable by 30th September 1997.
c. Existing shareholders may, to the extent of their entitlement, either wholly or in part,
transfer their rights to outsiders.
d. Singh exercised his option under the issue for 50% of his entitlements and the
balance of rights he sold to Ananth for a consideration of Rs.1.50 per share.
e. Dividends for the year ended 31st March, 1997, at the rate of 15% were declared by
the company and received by Singh on 20th October,
f. On 1st November, 1997, Singh sold 20,000 equity shares at a premium of Rs.3 per
share
The market price of share on 31-12-1997 was Rs.13. Show the investment Account as it
would appear in Singh’s books on 31-12-1997 and the value of shares held on that date.

7. On 1-4-1996, Sundar had 25,000 equity shares of ‘X’ ltd at a book value of Rs.15 per share
(Face Value Rs.10). On 20-06-1996, he purchased another 5000 shares of the company at
Rs.16 per share. The directors of ‘X’ ltd announced a bonus and rights issue. No dividend
was payable on these issues. The terms of the issue are as follows:
Bonus basis 1:6 (date 16-8-1996)
Rights basis 3:7 (Date-31-8-1996) Price Rs.15 per share.
Due date for payment 30-9-1996
Shareholders can transfer their rights in full or in part. Accordingly sundar sold 33-1/3% of
his entitlement to sekhar for a consideration of Rs.2 per share.
Dividends:- Dividends for the year ended 31-3-1996 at the rate of 20% were declared by X
ltd and received by sundar on 31-10-1996. Dividends for shares acquired by him on 20-06-
1996 are to be adjusted against the cost of purchase.
On 15-11-1996, Sundar sold 25,000 equity shares at a premium of Rs.5 per share.
You are required to prepare in the books of Sundar:
(1) Investment Account
(2) Profit & Loss Account.
For your exercise assume that the books are closed on 31-12-1997 and shares are valued at
average cost.
8. On 1.4.2002, Mr. Krishna Murty purchased 1,000 equity shares of Rs.100 each in TELCO
Ltd @ Rs.120 each from a Broker, who charged 2% brokerage. He incurred 50 paise per
Rs.100 as cost of shares transfer stamps. On 31.1.2003 bonus was declared in the ratio of
1:2. Before and after the record date of bonus shares, the shares were quoted at Rs.175 per
share and Rs.90 per share respectively. On 31.3.2003 Mr.krishna murty sold bonus shares
to a broker, who charged 2% brokerage.
Show the investment account in the books of Mr.Krishna Murty, who held the shares as
current assets and closing value of investments shall be made at cost or market Value
whichever is lower.

Rajan Adhikari, FCA Investment Accounting CAP -II

9. Rajan Ltd. acquired 2,000 Equity Shares of Kasirajan Ltd. on cum-right basis at Rs.75 per
share. Subsequently kasirajan Ltd. made a rights issued of 1:1 at Rs.60 per share, which
was subscribed for by rajan Ltd. Calculate cost of total invetsments at the year
end.(November 2010, 5 marks)

10. H Purchased 500 Equity shares of Rs.100 each in ABC Company Limited for Rs.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 shares as a bonus for every
equity shares held by them. Prior to capitalization, the shares of ABC Co.ltd were quoted
at Rs.175 per share. After the capitalization the shares were quoted at rs.92.50 per share. H
sold the bonus shares and received Rs.90 per share. Show investment A/c in H’s books on
average cost basis as per AS-13.
11. Irfan carried out the following transactions in the shares of Sky Ltd.
(a) On 1st April, 2007 he purchased 20,000 equity shares of Rs.1 each fully paid up for
Rs.30,000
(b) On 15th May 2007, Irfan sold 4,000 shares for Rs.7,600
(c) At a meeting on 15th June 2007, the company decided:
(i) To make a bonus issue of one fully paid up share for every four shares held on
1st June 2007 and,
(ii) To give its members the right to apply for one share for every five shares held
on 1st June 2007 at a price of Rs.1.50 per share of which 75 paisa is payable on or
before 15th July 2007 and the balance 75 paisa per share on or before 15th
September 2007.
The Shares issued under (i) and (ii) were not to rank for dividend for the year ending
31st December 2007.
(a) Irfan received his bonus shares and took up 2000 shares under the right issue,
paying the sum there on when due and selling the rights of the remaining shares
at 40 paise per share; the proceeds were received on 30th September 2007.
(b) On 15th March 2008, he recived a dividend from Sky Ltd. of 15 percent in
respect of the year ended 31st Dec 2007.
(c) On 30th March he received Rs.14,000 from the sale of 10,000 shares.
You are required to record these transactions in the investment Account in irfan’s books
for the year ended 31st March 2008 transferring any profits or losses on these
transactions to profit and loss account. Apply average basis. Expenses and tax to be
ignored.

12. On 1st April, 2009 XY Ltd has 15,000 equity shares of ABC Ltd. at a book value of Rs.15
per share (face value of Rs.10 per share). On 1st June 2009, XY Ltd acquired 5,000 equity
shares of ABC Ltd. for Rs.1,00,000 on cum right basis. ABC Ltd. announced a bonus and
right issue.
(1) Bonus was declared, at the rate of one equity share for every five shares held. On 1st
July 2009.
(2) Right shares are to be issued to the existing shareholders on 1st September 2009. The
Company will issue one right shares for every 6 shares at 20% premium. No dividend was
payable on these shares.

Rajan Adhikari, FCA Investment Accounting CAP -II

(3) Dividend for the year ended 31.3.2009 were declared by ABC Ltd. @ 20% which was
received by XY Ltd. on 31st October 2009.
XY Ltd.
(i) Took up half the right issue.
(ii) Sold the remaining rights for Rs.8 per share
(iii) Sold half of its share holdings on 1st January 2010 at Rs.16.50 per share. Brokerage
being 1%.
You are required to prepare Investment account of XY Ltd. for the year ended 31st March
2010 assuming the shares are being valued at average cost.

13. On 1st April, 2010, Rajat has 50,000 equity shares of P ltd. at book value of Rs.15 per share
(face Value of Rs.10 each). He provides you the further information:
(1) On 20th June 2010 he purchased another 10,000 shares of P ltd at Rs.16 per share.
(2) On 1st August, 2010 P.Ltd issue 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 Rs.15 per share. Shareholders
can transfer their rights in full or in part.
Rajat sold 1/3rd of the entitlement to Umang for a consideration of Rs.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.

14. In 2011 , M/s Wye Ltd issued 12% fully paid debentures of Rs.100 each, Interest being
payable half yearly on 30th september and 31st March of every accounting year. On 1st
December, 2012 M/s Bull and bear purchased 10,000 of these debentures at Rs. 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 Rs.106 cum-interest price, again paying
brokerage @ 1% of cum-interest amount.
Prepare Investment account in the books of M/s Bull and Bear for the period 1st December,
2012 to 1st March 2013.

15. Smart Investments made the following investments in the year 2013-14:
12% State Government Bonds having face value Rs. 100
Date Particulars
01.04.2013 Opening Balance (1200 Bonds) book value of Rs. 126,000
02.05.2013 Purchased 2,000 bonds @ Rs.100 cum interest
30.09.2013 Sold 1,500 bonds at Rs.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 @ Rs.200 on Cum-Right Basis on
Cum-Right Basis. Brokerage of 1% was paid in addition (Face
Value of Shares Rs.10)
03.06.2013 The company announced a bonus issue of 2 shares for every 5
shares held

Rajan Adhikari, FCA Investment Accounting CAP -II

16.08.2013 The Company made a right issue of 1 share for every 7 shares held
at Rs.250 per share.
The entire money was payable by 31.08.2013
22.08.2013 Rights to extent of 20% was sold @ Rs.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 @ Rs.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 stock exchange @ 220
Prepare Investment Accounts in the books of Smart Investments. Assume that the average
cost method is followed.
16. Gopal purchased on 1st March, Rs.24,000 5% Bharat Debentures stock at Rs.90 cum
interest, interest being payable on 31st March and 30th September each year. Stamp and
expenses on purchase amounted to Rs.20 and brokerage at 2% was charged on cost; Interest
for the half year was received on the due date. On 1st September, Rs.10,000 of the stock
was sold at 92 ex-interest less brokerage at 2%. On 30th September, Rs.8,000 stock was
purchased at Rs.91 ex-interest and brokerage of 2% and stamp charges of Rs.10. On 1st
December, Rs.6,000 stock was sold at 94 cum interest less brokerage 2%. The market price
of stock on 31st December was 91%. Show the investment Account for the year ended 31st
December, making all calculations in months.

17. P limited held on 1st April, 2001 Rs.2,00,000 of 9% government loan (2003) at
Rs.1,90,000. (Face value of a loan is Rs 100 each). On 31st May, 2001 the company
purchased the same government loan of the face value of Rs.80,000 at Rs.95 (net) Cum
Interest. On 1st June, 2001 Rs.60,000 face value of a loan was was sold at Rs.94 (net) ex-
interest. Interest on the loan was paid each year on 30th June and 31stDecember and was
credited by the bank on the same date. On 30th November 2001 Rs.40,000 face value of
the Loan was sold at Rs.97 (net) Cum Interest. On 1st December 2001, the company
purchased the same loan Rs.10,000 at par ex-interest. On 1st March, 2002 the company
sold Rs.10,000 face value of the loan at 95 ex-interest. The market price of the Loan on
31st March 2002 was Rs.96. draw up the 9% government loan (2003) accounts in the books
of P limited. First in First out method should be followed for sale and the balance of the
loan held by the company should be valued at total average cost or market price whichever
is lower. Calculation shall be made to the nearest rupee or multiple thereof.

18. A Limited purchased 5,000 equity shares (face value Rs. 100 each) of Allianz Limited for
Rs. 105 each on 1st April, 2014. The shares were quoted cum dividend. On 15th May, 2014,
Allianz Limited declared & paid dividend of 2% for year ended 31st March, 2014. On 30th
June, 2014 Allianz Limited issued bonus shares in ratio of 1:5. On 1st October, 2014
Allianz Limited issued rights share in the ratio of 1:12 @ 45 per share. A limited subscribed
to half of the rights issue and the balance was sold at Rs. 5 per right entitlement. The
company declared interim dividend of 1% on 30th November, 2014.

Rajan Adhikari, FCA Investment Accounting CAP -II

Right shares were not entitled to dividend. The company sold 3,000 shares on 31st
December, 2014 at Rs. 95 per share. The company A Ltd. incurred 2% as brokerage while
buying and selling shares.
You are required to prepare Investment Account in books of A Ltd.

19. On 1st April 2014, Hasan has 20,000 equity shares of Vayu Ltd., at a book value of Rs. 20
per share (face value of Rs. 10 each). He provides the following information:
i. On 10th June 2014, he purchased another 5,000 shares in Vayu Ltd., @ Rs. 15 per
share.
ii. On 1st August 2014 Vayu Ltd., issued one bonus share for every five shares held by
the shareholders.
iii. On 31st August 2014, the directors of Vayu Ltd. announced a rights issue which
entitle the shareholders to subscribe two shares for every six shares held @ of Rs.
15 per share. The shareholders can transfer their rights in full or in part. Hasan sold
1/4th of his right shares holding to Harsh for a consideration of Rs. 3 per share and
subscribed the rest on 31st of October 2014.
Prepare Investment A/c in the books of Hasan as on 31st October. 2014.

20. The following transactions of Nidhi took place during the year ended 31st March 2014:
1st April Purchased Rs. 12,00,000, 8% bonds at Rs. 80.50 cum-interest. Interest is
payable on 1st November and 1st May.
12th April Purchased 1,00,000 equity shares of Rs. 10 each in X Ltd. for Rs. 40,00,000
1st May Received half-year's interest on 8% bonds.
15th May X Ltd. made a bonus issue of three equity shares for every two held.
Nidhi sold 1,25,000 bonus shares for Rs. 20 each.
1st October Sold Rs. 3,00,000, 8% bonds at Rs. 81 ex-interest.
1st November Received half-year's bond interest.
1st December Received 18% dividend on equity shares in X Ltd.
Prepare the relevant investment account in the books of Nidhi for the year ended
31st March, 2014.

21. The following information is presented by Mr. Z, relating to his holding in 9% Central
Government Bonds.
Opening balance (face value) Rs.1,20,000, Cost Rs. 1,18,000 (Face value of each unit is
Rs. 100).
1.3.2008 Purchased 200 units, ex-interest at Rs. 98.
1.7.2008 Sold 500 units, ex-interest out of original holding at Rs. 100.
1.10.2008 Purchased 150 units at Rs. 98, cum interest.
1.11.2008 Sold 300 units, ex-interest at Rs. 99 out of original holdings.
Interest dates are 30th September and 31st March. Mr. Z closes his books every
31st December. Show the investment account as it would appear in his books. Mr. Z follows
FIFO method.
22. A debt security has a stated principal amount of Rs. 1,00,000, which will be repaid by the
issuer at maturity in 5 years, and a stated coupon interest rate of 6% per year payable
annually at the end of each year until maturity (i.e., Rs. 6,000 per year). Muktinath limited
purchased the debt security in the market on 01.04.2069, for Rs. 93,400 (including

Rajan Adhikari, FCA Investment Accounting CAP -II

transaction cost of rupees 100) that is, at a discount of 6,600 to its principal (par) amount
of rupees 1,00,000. Prepare journal Entries.

23. Nepal life insurance company limited purchased the following equity shares of different
company. The date of purchase, purchase price and market price of these securities are
given as follows:
Company Purchase Face Value Cost Price Market Market
Date Value on Value on
purchase year end
A Ltd. 1.1.2011 2,000 2,500 3,000 2,800
B Ltd. 6.2.2011 3,000 3,000 2,500 2,700
C Ltd. 31.6.2011 1,000 1,000 800 900
D Ltd. 17.07.2011 1,000 1,500 2,000 2,100
Total 7,000 8,000 8,300 8,500
Assuming that the financial year the insurance company end on 31st December, journalise
the above transaction and prepare the investment account.
24. The following transactions by Mr. Nishchal took place during the year ended 31st March,
2012:
1st April Purchased Rs. 12,00,000 8 % bonds @ Rs. 80.5 cum-interest. Interest
is payable on 1st May.
12th April Purchased Rs. 1,00,000 equity shares of Rs. 10 each in X Ltd. for Rs.
40,00,000.
1st May Received half year‟s interest on 8% bonds.
15th May X Ltd. made a bonus issue of three equity shares for every two held.
Mr. Nishchal sold 1,25,000 bonus shares @ Rs. 20 each.
1st October Sold Rs. 3,00,000 8% bonds @ Rs. 81 ex-interest.
1st November Received half year‟s bond interest.
1st December Received 18% dividend on equity shares in X Ltd.
Prepare the relevant investment accounts in the books of Mr. Nishchal for the year ended
in31st March, 2012. (June 2012)(10 Marks)

25. On 1st Shrawan 2069; Mr. Akash purchased 5,000 equity shares of Rs. 100 each in BB
Bank Ltd. @ Rs. 120 each from a broker who charged 2% brokerage. On 31st Baisakh
2070; bonus shares were declared in the ratio 1:2. Before and after the record of bonus
shares, the shares were quoted Rs. 175 per share and Rs. 90 per share respectively. On 31st
Ashadh 2070, Mr. Akash sold bonus shares to a broker who charged 2% brokerage.
Show the investment account in the books of Mr. Akash, who held the shares as current
assets and closing value should be made as per NAS. (December 2013)(10 Marks)

26. On 1st Shrawan 2069, Mr. Pradhan has 100,000 equity shares of ABC Bank Ltd. at a book
value of Rs. 150 per share (face value Rs. 100 each). Further information have been
provided to you.
i. On 20th Ashwin 2069, he purchased another 20,000 shares of ABC Bank Ltd at Rs.
160 per share.

Rajan Adhikari, FCA Investment Accounting CAP -II

ii. 1st Mangsir 2069, ABC Bank Ltd. issued one equity bonus share for every six shares
held by the shareholders.
iii. 29th Magh, 2069, the directors of ABC Bank Ltd. announced a right issue which
entitles the holders to subscribe three shares for every seven shares at Rs. 150 per
share. Shareholders can transfer their rights in full or in part.
Mr. Pradhan sold '/3rd entitlement to Mr. Sharma for a consideration of Rs. 20 per share
and subscribe the rest on 5th Fagun 2069.
You are required to prepare Investment A/c in the books of Mr. Pradhan for the year ending
31st Ashadh 2070. ( June 2014)(5 Marks)

27. On 01.04.2071, Mr. M. Pandey purchased 5,000 equity shares of Rs 100 each in Jyoti
Bikash Bank Ltd. @ Rs 120 each from a broker, who charged 2 % brokerage. He incurred
50 paisa per Rs 100 as cost of shares transfer stamps. On 31-01-2072 bonus was declared
in the ratio of 1:2. Before and after the record date of bonus shares, the shares were quoted
at Rs 175 per share and Rs 90 per share respectively. On 31-03-2072, Mr. M. Pandey sold
bonus shares to a broker, who charged 2% brokerage.
Show the Investment Account in the books of Mr. M. Pandey, who held the shares as Current
Assets and closing value of investments shall be made at cost or market value whichever
is lower. (December 2015)(10 Marks)

28. Retirement Benefit Plan of ABC Bank Ltd. purchased preference shares of XYZ
Bank Ltd. face value of Rs. 1,000,000 at Rs. 1,037,000 on 1st Shrawan, 2069. The
coupon rate of the preference shares is 12% and maturity date of the shares is 31st
Ashadh, 2074. You are required to prepare the investment account in the books of
retirement benefit plan up to the year ended 31st Ashadh, 2074. The effective interest
rate of the investment is 11%. (June 2018)(10 Marks)

29. On 1.4.2070, Mrs. Sabina Thapa purchased 1,000 equity shares of Rs. 100 each in SBB
Ltd. @ Rs. 120 each from a Broker, who charged 1% brokerage. She incurred 50 paisa per
Rs. 100 as cost of shares transfer stamps. On 31.1.2071, 50% Bonus share was declared.
Before and after the record date of bonus shares, the shares were quoted at Rs. 155 per share
and Rs. 90 per share respectively. On 28.2.2071 Mrs. Thapa sold bonus shares through a
Broker, who charged 1% brokerage.

She held the shares as Current assets. Show the Investment Account in the books of Mrs.Thapa
on 31.3.2071 when the market value per share was Rs. 79. RTP Dec 14

30. Bir Bikram purchased 5,000; 13.5% debentures of face value of Rs. 100 each of Miteri
Ltd. on 1st May 2016 at Rs. 105 cum interest basis. The interest on these debentures is
payable on March end and September end respectively. On 1st August 2016, she again
purchased 2,500 of such debentures at Rs. 102.50 each on cum interest basis. On 1st
October 2016, she sold 2,000 debentures at Rs. 103 each.
The market value of the debentures as at the close of the year was Rs. 106. Prepare the
debenture investment account in the books of Bir Bikram for the period ended 31st
December 2016 on average cost basis. RTP June-17

Rajan Adhikari, FCA Investment Accounting CAP -II