## Purchase and Sale of Equity Shares
### Key Difference from Debentures
Equity shares carry no fixed return — there is no interest to strip out. The Investment Account records only cost, and income (dividend) is recognised when declared.
### Cost Determination: Weighted Average Method (WAM)
AS 13 requires that when a portion of an identical holding is sold, the cost attributable to that portion is determined using the Weighted Average Cost method (unless FIFO is specifically applicable).
$$\text{WAM} = \frac{\text{Total Cost of All Shares Held}}{\text{Total Number of Shares Held}}$$
### Investment Ledger Format
The ledger tracks three columns on each side:
| Side | Columns | ||
|---|---|---|---|
| Debit | No. of Shares \ | Div. \ | Amount |
| Credit | No. of Shares \ | Div. \ | Amount |
The "Div" column records dividends received (kept separate from capital).
### Step-by-Step: Accounting for Equity Investment
1. Purchase → Debit Investment A/c at cost (No. of shares + Amount)
2. Sale → Credit Investment A/c at WAM cost of shares sold; difference goes to P&L
3. Profit/Loss → Balancing figure transferred to P&L A/c
4. Balance → Remaining shares at their WAM cost
### Journal Entries
On purchase:
```
Investment in Equity Shares A/c Dr (cost)
To Bank A/c
```
On sale:
```
Bank A/c Dr (sale proceeds)
To Investment in Equity Shares A/c (WAM cost of shares sold)
To Profit on Sale of Investment (if profit)
[OR debit P&L for loss]
```