## Sale of Long-term Equity Investments under AS 13
### Step-by-Step Approach
Step 1: Build the total cost pool
```
Opening shares cost + Purchases during year + Bonus (₹0) + Right shares subscribed
– Pre-acquisition dividend received
= Total cost of ALL shares held before sale
```
Step 2: Calculate Weighted Average Cost per Share
$$\text{Avg cost per share} = \frac{\text{Total cost pool}}{\text{Total shares held}}$$
Step 3: Calculate Net Sale Proceeds
$$\text{Net SP} = \text{Gross sale price} - \text{Brokerage}$$
Step 4: Calculate Cost of Shares Sold
$$\text{Cost of shares sold} = \text{Shares sold} \times \text{Avg cost per share}$$
Step 5: Profit or Loss
$$\text{Profit/(Loss)} = \text{Net SP} - \text{Cost of shares sold}$$
---
### Cost of Acquisition — What to Include
| Include | Exclude |
|---|---|
| Purchase price | Pre-acquisition dividend received |
| Brokerage | Post-acquisition dividend |
| Share transfer fees | |
| Stamp duty |
---
### Ledger Entry on Sale
```
CIB A/c Dr [Net SP] ← Amt column
To Investment A/c [Cost of shares sold] ← Amt column
To P&L (Profit on sale) [Profit] ← Div column (some formats)
```
If a loss:
```
CIB A/c Dr [Net SP]
P&L (Loss) Dr [Loss]
To Investment A/c [Cost of shares sold]
```
---
### When to Use FIFO vs Weighted Average
AS 13 does not mandate a specific cost formula. However, Weighted Average is the most commonly tested method at CA Inter. Use it unless the question specifies otherwise.