Need clarification or logic behind the net journal entries of this financial transactions

These are the couple of financial transactions:

1. 5th of April, 2022: Bought 100 Shares in Bharat Ltd. @ Rs.15 per share, brokerage paid Rs.30

2. 18th of April, 2022: Sold 40 Shares in Bharat Ltd. @ Rs.18 per share, brokerage paid Rs.15

I am having query relating to the Journal entries for recording the above financial transactions. I have shared the Journal entries on my personal observation of these two financial transaction below and I will be glad if the fellow members of this community can review them and provide suggestions if there is anything wrong.

Other than this, I have been facing some issues with understanding the logic behind the Journal entry given in the book to record the 2nd transaction that's been shared above. Although, I have shared the Journal entry based on my personal observation of the transaction below and along with it I have also shared the answer that's been given in the book for recording the 2nd financial transaction.

I will highly appreciate, if anybody can help me understand the logic or possibly provide the detailed Journal entries that's been passed for arriving at the net Journal entry shared in the book as an answer to record the 2nd financial transaction.

Financial transaction No.1: 5th of April, 2022: Bought 100 Shres in Bharat Ltd. @ Rs.15 per share, brokerage paid Rs.30

Journal entry: (as per my personal observance)

Investment A/c... Dr. Rs.1,530

To Bank A/c Rs.1,530

Note: Here, the amount of Brokerage paid being capitalised is clearly understandable.

Financial transaction No.2: 18th of April, 2022: Sold 40 Shares in Bharat Ltd. @ Rs.18 per share, brokerage paid Rs.15

Journal entry: (as per my observation)

Bank A/c... Dr. Rs.705

Brokerage A/c... Dr. Rs.15

To Investment A/c (40 Shares x Rs.15) Rs.600

To Profit on Sale of Investment A/c Rs.120

However the Journal entry given in the Book as an answer to record this particular financial transaction says different. It says:

Bank A/c... Dr. Rs.705

To Investment A/c Rs.705

Can anyone explain how the Book arrived at this Journal entry?

Hey Sohom! Great question — let’s break this down clearly.

Transaction 1:

Bought 100 shares @ Rs.15/share + Rs.30 brokerage

Your entry:

Explanation:

Purchase cost = 100 × 15 = Rs.1,500
Brokerage (capitalized as part of investment cost) = Rs.30
Total cost of investment = Rs.1,530

Your entry is perfect. The brokerage cost is added to the purchase price, so total debit to Investment A/c is Rs.1,530.

Transaction 2:

Sold 40 shares @ Rs.18/share, brokerage Rs.15

Your entry:

Sale proceeds = 40 × 18 = Rs.720
Less brokerage = Rs.15
Net cash received = Rs.705 (debit Bank A/c)
Cost of shares sold = 40 × 15 = Rs.600 (Investment A/c credited)
Profit = Rs.120 (Profit on sale credited)

The Book’s entry:

Why does the book simplify like this?

The book’s entry is a net journal entry combining sale proceeds and cost of shares sold in one line.
It does not separately show brokerage or profit explicitly but assumes the net effect is recorded by reducing Investment A/c by Rs.705 (net amount).
This is a simplified approach and may be used in some cases to reduce complexity, but it lacks transparencybecause it doesn’t show profit or brokerage separately.

What’s the logic behind the book’s entry?

Bank received Rs.705 → Debit Bank A/c Rs.705
Investment is reduced by Rs.705 → Credit Investment A/c Rs.705

But, in reality:

Cost of investment for 40 shares was Rs.600
Brokerage of Rs.15 is an expense and should be separately recorded (Debit Brokerage A/c Rs.15)
Profit on sale Rs.120 should be separately recorded (Credit Profit on Sale A/c Rs.120)

Recommended detailed journal entries for Transaction 2 (more transparent):

Record brokerage expense:

Record sale of shares and profit:

Or combine net cash and brokerage:

Summary

Your journal entry is correct and shows all details transparently.
The book’s entry is a simplified, combined entry that doesn’t separately recognize brokerage or profit.
For clarity and audit purposes, it’s better to maintain separate accounts for brokerage and profit on sale.