## Comprehensive Investment Account Problem (AS 13)
This type of problem requires maintaining a columnar Investment Account (showing No. of Shares | Dividend | Amount) and handling four types of events:
1. Opening balance – record shares and cost
2. Purchase – add shares at cost (including brokerage)
3. Right shares – split between subscribed (add cost) and renounced (apply fall-in-value rule)
4. Sale – calculate profit using weighted average cost
5. Year-end valuation – compare cost vs. market value; lower is used for current investments; for long-term, provision only if fall is other than temporary
---
### Format of Investment Account
| Dr side | | | | Cr side | | |
|---|
| Date / Particulars | Shares | Div | Amount | Date / Particulars | Shares | Div | Amount |
---
### Step-by-Step Approach
Step 1 – Record all Dr entries (inflows):
Opening balance, purchases, profit on sale (balancing figure)
Step 2 – Record all Cr entries (outflows):
Right share cost reduction, sale proceeds, closing balance
Step 3 – Calculate weighted average cost per share:
```
Weighted Avg Cost = Total Cost in Account ÷ Total Shares held
```
Step 4 – Profit on sale:
```
Profit = Sale Proceeds – (Shares Sold × Weighted Avg Cost)
```
Step 5 – Year-end valuation:
```
Carrying amount = Remaining Shares × Weighted Avg Cost
Market Value = Remaining Shares × Market Price
If Cost < Market Value → No adjustment needed
If Cost > Market Value → Provision for diminution required
```
### Example 1
Question 34 – CDR (Pages 66–68)
Given transactions:
| Date | Event | Shares | Rate | Amount |
|---|
| 01.04.19 | Opening balance | 1,000 | ₹120 | ₹1,20,000 |
| 05.04.19 | Purchase | 200 | ₹135 | ₹27,000 |
| 08.04.19 | Right shares issued (1:6 ratio → 200 rights) | — | — | — |
| 10.10.19 | Sale | 350 | ₹140 | ₹49,000 |
| 31.03.20 | Year-end market price = ₹125/share | — | — | — |
Right Shares (08.04.19):
- Total shares before rights = 1,200; rights issued = 200
- 100 subscribed, 100 renounced @ ₹20 → proceeds = ₹2,000 (but price fell ₹3,400)
- Since Proceeds (₹2,000) < Fall (₹3,400): entire proceeds reduce investment
Additional exception entry for the unrealised fall:
```
Bank A/c Dr ₹2,000
To Investment A/c ₹2,000 ← entirely reduces cost (fall > proceeds)
```
Net investment cost reduction from rights = ₹3,400 (also directly adjusted in account)
---
Investment Account (summarised):
| Dr | Shares | ₹ | Cr | Shares | ₹ |
|---|
| Opening (01.04.19) | 1,000 | 1,20,000 | By CIB – Rights adj (08.04.19) | — | 3,400 |
| Purchase (05.04.19) | 200 | 27,000 | By Sale (10.10.19) | 350 | 41,883* |
| Profit on sale | — | 7,117 | By Bal c/d (31.03.20) | 850 | 1,08,834 |
| Total | 1,200 | 1,54,117 | Total | 1,200 | 1,54,117 |
*Sale cost = 350 × ₹119.67 ≈ ₹41,883
---
Weighted average cost after adjustments:
```
Total cost after rights adj = 1,20,000 + 27,000 – 3,400 = 1,43,600
Total shares (after rights) = 1,200
Weighted avg cost per share = 1,43,600 ÷ 1,200 = ₹119.67
```
Profit on sale (10.10.19):
```
Sale proceeds = 350 × 140 = ₹49,000
Cost of shares sold = 350 × 119.67 = ₹41,883
Profit on sale = ₹7,117
```
Year-end valuation (31.03.20):
```
Remaining shares = 1,200 – 350 = 850
Carrying cost = 850 × 119.67 = ₹1,01,720 (≈ ₹1,01,717)
Market value = 850 × 125 = ₹1,06,250
Cost (₹1,01,717) < MV (₹1,06,250) → No provision required
```