## Sale of Investments — Weighted Average Cost Method
### Why Weighted Average?
Shares of the same company bought at different times and prices form a homogeneous pool. AS 13 requires using the Weighted Average Cost to identify cost of shares disposed of.
WAM Formula:
```
WAM = Total Cost of All Shares Held
─────────────────────────────
Total Number of Shares Held
```
### Events That Change WAM
| Event | Shares | Amount | WAM Impact |
|---|---|---|---|
| New purchase | ↑ | ↑ | Recalculate |
| Bonus shares | ↑ | Nil | Decreases |
| Right shares subscribed | ↑ | ↑ (subscription price) | Recalculate |
| Dividend on CY purchases (recovery of cost) | — | ↓ | Decreases |
| Sale of shares | ↓ | ↓ (WAM × shares sold) | Unchanged |
> Critical Rule: A sale does NOT change WAM. If no new purchase occurs between two sales, the second sale uses the same WAM — no need to recalculate.
### Profit/Loss Calculation
```
Profit/Loss = Sale Proceeds − (WAM × Shares Sold)
```
### Journal Entries
On Profit:
```
Bank/CIB A/c Dr (sale proceeds)
To Investment A/c (WAM × shares sold)
To P&L A/c (profit)
```
On Loss:
```
Bank/CIB A/c Dr (sale proceeds)
P&L A/c Dr (loss)
To Investment A/c (WAM × shares sold)
```
### Investment Ledger (Credit side for a sale)
- No. of Shares column: shares sold
- Div column: CIB (cash received from buyer)
- Amount column: WAM cost of shares sold
### WAM Recalculation — Step-by-Step
Always recalculate after each purchase, bonus, subscribed rights, or recovery-of-cost event. Do NOT recalculate after a sale.