## Right Shares — Subscribe vs Renounce (AS 13)
### What Are Right Shares?
When a company raises fresh equity, existing shareholders are given the right to subscribe to new shares at a preferential price (below market value) — proportionate to their existing holding.
### Two Choices for the Investor
| Action | Meaning | Accounting Treatment |
|---|---|---|
| Subscribe | Pay the issue price and acquire more shares | Add subscription price to cost of investment |
| Renounce | Sell the right to someone else (earn a premium) | Proceeds credited to Profit & Loss A/c |
### Why Renouncement Proceeds Go to P&L?
The right arose without any cost to the investor — it is an entitlement attached to existing shares. When sold, the sale proceeds represent income, not a return of capital. Therefore, the cost of the original investment is not reduced.
### Subscribe — Journal Entry
```
Investment in Equity Shares A/c Dr. [Subscription price × Shares subscribed]
To Bank A/c
```
### Renounce — Journal Entry
```
Bank A/c Dr. [Proceeds]
To Profit & Loss A/c
```
> No entry in the Investment ledger for the right itself — the right is never capitalised.
### Interim Dividend Treatment (AS 13)
Dividend declared after the date of investment is credited to P&L (not deducted from cost). The investment ledger shows the dividend as a credit, with a corresponding debit to P&L via a transfer entry.
```
Bank A/c Dr. [Dividend received]
To Investment in Equity Shares A/c
Investment in Equity Shares A/c Dr.
To Profit & Loss A/c
```
(Or directly: Bank Dr. / P&L Cr. — the ledger transfer makes both visible)