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Investment

AKSHIT MALHOTRA (C.A Final Student) (1337 Points)

05 April 2012

I WANT TO KNOW THAT IN THE CHAPTER INVESTMENT OF ACCOUNTS(GROUP 1) WHEN DIVIDEND IS TO BE TAKEN IN INVESTMENT A/C & WHEN IT IS TAKEN IN PROFIT & LOSS A/C.PLEASE GIVE A PRACTICAL EXAMPLE.I HAVE NOT UNDERSTOOD STUDY MATERIAL ILLUSTRATIONS.

ALSO TELL WHY SALE VALUE OF EQUITY SHARES WHICH R SOLD(NOT SALE OF RIGHT ISSUE) NOT TAKEN WHILE CALCULATING COST OF SHARES AT THE END OF THE YEAR.

THANKS A LOT.

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7 Replies

AKSHIT MALHOTRA (C.A Final Student) (1337 Points)
Replied 06 April 2012

PLEASE HELP /

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AKSHIT MALHOTRA (C.A Final Student) (1337 Points)
Replied 07 April 2012

PLLLLLLLLLLLL HELLLLLLLLPPPPPPPPP.

AKSHIT MALHOTRA (C.A Final Student) (1337 Points)
Replied 09 April 2012

SO I HEAR LOT OF THINGS ABOUT CACLUB MEMBERS & IT HAS BEEN PROVED NOW.

I POSTED THIS QUES.2 DAYS AGO & NOBODY HAS HELPED ME.

Jairam J (CA, B.COM(Hons.)) (382 Points)
Replied 09 April 2012

When a security is brought before book-closure date i.e the cut off date where all the members registered in the register get dividend which was proposed earlier by the BOD..The buyer gets dividend rights also and the security is said to be cum-dividend.. In such a situation the acquisition cost must be arrived after deducting the amount recievable in respect of dividends.. For e.g A purchases 500 shares at Rs. 50 cum-dividend and gets Rs. 5 per share dividend.. So cost of acquisition is Rs.500*(50-5).. This can also happen when BOD declares dividend for the period. But you don't have shares of that company during that period..The only reason you got the right to dividend is because your name appears on the register..

suppose u purchase shares of xyz ltd in april 2011....and the company declared dividend on those shares related to the f.y 2010-11....that dividend will be received by u coz your name is on the register...this is pre accquisition dividend which will be deducted from the cost of the investment..

The pre-acquision dividend will reduce the cost of investment It means dividend received for a period in which you did not hold those shares.

Hope that clears.

AKSHIT MALHOTRA (C.A Final Student) (1337 Points)
Replied 09 April 2012

YES JAIRAM BUT WHT ABT 2nd PART.

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Jairam J (CA, B.COM(Hons.)) (382 Points)
Replied 09 April 2012

We take the cost of shares sold (computed using WAverage or FIFO) and not the sales value for reasons that we are ascertaining the cost at the end of the year.. Do I really need to explain further..Its like when we use cost of goods sold and not the sales value for finding the closing stock of inventory.. Same principles applied here