INVESTMENT OR LOANS AND ADVANCES

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I have a question regarding the following matter.

"A" Ltd have subscribed for shares in new company "B"Ltd (as first Subscriber), now the accounting year for "B" Ltd ends on 31/03/2011, now the problem is whether the amount invested as subscriber in "A"ltd has to shown under the head of Investmentsor Loans & Advances. ]

"A" ltd argues that as we have not received share certificate we can show it as Loans & Advances while the auditor of "B" ltd says that it should be under the head of Investments.

Please guide me in the matter.

Nirali Solanki 

Replies (2)

The same should be shown under Investments in the books of Investing company & not under Loans & advances.  Because as per the basic accounting concepts "Substance over form", the transaction should be recorded even though the legality of the transaction yet to be happen

according to me it should be shown as Investment....


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