Accounting Entry for Shares
This query is : Resolved
Quick Summary
03 January 2025
Kindly guide me how to make accounting entry for Shares if:-
1. A company Purchases eq.Shares
2.Sells an eq.shares
3.Entry for Gain/(Loss)
and how will I present in company books of Accounts?
1. A company Purchases eq.Shares
2.Sells an eq.shares
3.Entry for Gain/(Loss)
and how will I present in company books of Accounts?
03 January 2025
When a company purchases, sells, or experiences gains/losses on equity shares, the accounting entries and presentation in the books of accounts are handled as follows:
**1. Purchase of Equity Shares**
* When a company purchases equity shares of another company, it is considered an investment.
* The investment is recorded at cost, which includes the purchase price plus any directly attributable costs like brokerage and commissions.
**Journal Entry:**
Investment in Equity Shares A/c Dr. XXX
To Bank A/c Cr. XXX
(Being purchase of XXX shares of Company Y)
**2. Sale of Equity Shares**
* When the company sells these shares, the proceeds from the sale are compared to the carrying amount (cost) of the shares to determine any gain or loss.
**Journal Entry:**
Bank A/c Dr. XXX
To Investment in Equity Shares A/c Cr. XXX
To Gain/Loss on Sale of Investments A/c Cr./Dr. XXX
(Being sale of XXX shares of Company Y)
**3. Entry for Gain/(Loss)**
* The gain or loss on the sale of investments is the difference between the selling price (net of any selling expenses) and the carrying amount (cost) of the shares sold.
* If the selling price is higher than the carrying amount, it's a gain. If it's lower, it's a loss.
**Journal Entry:**
Bank A/c Dr. 12,000
To Investment in Equity Shares A/c Cr. 10,000
To Gain on Sale of Investments A/c Cr. 2,000
(Being sale of 1,000 shares of Company B)
**Presentation in Company Books of Accounts**
* **Balance Sheet:**
* Investments in equity shares are usually classified as non-current assets (unless they are intended to be held for trading, in which case they are current assets).
* They are shown at cost, subject to any impairment.
* **Income Statement:**
* Gains or losses on the sale of investments are reported as part of other income or expenses.
**1. Purchase of Equity Shares**
* When a company purchases equity shares of another company, it is considered an investment.
* The investment is recorded at cost, which includes the purchase price plus any directly attributable costs like brokerage and commissions.
**Journal Entry:**
Investment in Equity Shares A/c Dr. XXX
To Bank A/c Cr. XXX
(Being purchase of XXX shares of Company Y)
**2. Sale of Equity Shares**
* When the company sells these shares, the proceeds from the sale are compared to the carrying amount (cost) of the shares to determine any gain or loss.
**Journal Entry:**
Bank A/c Dr. XXX
To Investment in Equity Shares A/c Cr. XXX
To Gain/Loss on Sale of Investments A/c Cr./Dr. XXX
(Being sale of XXX shares of Company Y)
**3. Entry for Gain/(Loss)**
* The gain or loss on the sale of investments is the difference between the selling price (net of any selling expenses) and the carrying amount (cost) of the shares sold.
* If the selling price is higher than the carrying amount, it's a gain. If it's lower, it's a loss.
**Journal Entry:**
Bank A/c Dr. 12,000
To Investment in Equity Shares A/c Cr. 10,000
To Gain on Sale of Investments A/c Cr. 2,000
(Being sale of 1,000 shares of Company B)
**Presentation in Company Books of Accounts**
* **Balance Sheet:**
* Investments in equity shares are usually classified as non-current assets (unless they are intended to be held for trading, in which case they are current assets).
* They are shown at cost, subject to any impairment.
* **Income Statement:**
* Gains or losses on the sale of investments are reported as part of other income or expenses.
Message likes :
1 times
03 January 2025
Completely clear. Thank you So much Sir.
03 January 2025
You are welcome.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- TDS CREDIT MISMATCHING
- Buy back of shares u/s69
- Unregistered suppliers utility
- Tax Audit Applicability – Newly Formed Partnership Firm with Profit Below 6%/8%
- Difference between Date of Payment and Date of Deduction?
- TDS AND ITR ISSUE
- URGENT-Eligible leaves being shown as 24 days for 3 years Articleship instead of 156 days in 108
- ADDITION OF CHALLAN IN TDS RETURN FORM 140
- TODAY INCOME TAX SITE IS NOT WORKING ANY OFFICIAL EXTENSION
- GST Rate for Catering Services
- CALCULATION OF DEFFERED TAX - OP BL IS DTL & CURRET IT DTA
- LLP audit under companies act
- Experienced CA recommendation from Kolkata for FNO return filing
- Interest Reporting in Form 168
- Sales of goods of amount Rs77 lakhs to a party
- Tax Demand of ₹4,650 for AY 2026-27
- Concept of Vendor and customner reconciliation
- Mistake in e-invoice identified after 24 hours
- EXPORT PAYMENT
- NRI ITR2 account in 2025-26.
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
