## Pre-Acquisition vs Post-Acquisition Dividend under AS 13
### The Core Question
Before booking dividend as income, ask: Was this dividend earned AFTER you became a shareholder?
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### Classification Framework
| Source of Dividend | Classification | Accounting Treatment | Ledger Column |
|---|---|---|---|
| Dividend on opening balance shares | Post-Acquisition | Credit P&L (Dividend Income) | DIV column |
| Dividend on current-year purchases | Pre-Acquisition | Credit Investment A/c (recovery of cost) | AMT column |
| Dividend on Bonus / Right shares | Not Applicable | — | — |
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### Why Pre-Acquisition Dividend Reduces Cost
When shares are bought cum-dividend, part of the price you paid actually represents the upcoming dividend. When you receive that dividend, it is merely getting back what you overpaid — not earning new income. Therefore, it reduces your investment cost.
AS 13 Rule: Where an investment is purchased cum-dividend, dividend received that relates to a pre-acquisition period should be credited to the Investment Account, not to Income.
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### Journal Entries
Post-Acquisition Dividend (Opening shares)
```
Bank / CIB A/c Dr ₹15,000
To Dividend Income (P&L) ₹15,000
```
→ Recorded in the DIV column of Investment Ledger
Pre-Acquisition Dividend (Current-year purchase)
```
Bank / CIB A/c Dr ₹7,500
To Investment in Equity Shares A/c ₹7,500
```
→ Recorded in the AMT column of Investment Ledger (reduces cost)
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### The Investment Ledger — Three-Column Format
The Investment Account uses three columns on each side:
- No. of Shares – tracks quantity
- Div – records P&L-side dividend entries (no cost impact)
- Amt – records cost/book-value entries
Pre-acquisition dividend appears only in the Amt column; post-acquisition dividend appears only in the Div column.