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Capital profit treatment

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Atharv Sankliya

1359 Points Posted on 11 January 2023

what will be the accounting treatment for profit from sale of investment (shares) ?
will it considered as capital profit?

Replies (6)

Quick Summary

This discussion clarifies the accounting treatment for profits made from selling investments, such as shares. While often referred to as a capital gain, according to AS-13, such profits are typically credited to the Profit and Loss (P&L) account, not directly to a capital reserve. This standard governs how investments are accounted for and disclosed.

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

212441 Points Posted on 11 January 2023

It is called CAPITAL GAIN........... BE LONG TERM OR SHORT TERM..

sabyasachi mukherjee

Profession Business

28246 Points Posted on 11 January 2023

Yes it will be transferred to capital reserve.

Atharv Sankliya

1359 Points Posted on 11 January 2023

But as per AS-13 it will credited to p&l account

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

212441 Points Posted on 12 January 2023

AS 13 deals with accounting for investments made by an enterprise in another enterprise and the disclosure of such investments in the financial statements. An enterprise holds investments for a variety of reasons. Such investments form a significant aspect of the operations of an enterprise in certain cases. Therefore, the evaluation of the performance of such an enterprise depends upon the return earned through such investments.

Hence the gain is transffered to P&L acct., while (any) loss is debited to cost of investment.