Hi Friends
the post is relating to Investment accounting. Since the current investment/stock in trade is valued at lower of cost or market value, which ever is less.
Question: Cost Rs.100 , Market price Rs.95
In the above case market price is lower than the cost, kindly advise me which accounting entry was correct at the time of valuation of investment as on 31st March.
1. Profit & Loss account a/c Dr 5
To Investment account 5
2. Profit & Loss account a/c Dr 5
To Provision for reduction in investment a/c 5
IF NO.1 is correct, then opening balance of investment is Rs.95 or Rs.100
If No.2 is correct, then MTM loss of Rs.5 (provision for reduction in investment) is allowed in income tax
Thanks
M.MAHESH
CAclubindia
