When a company parks its money in shares, debentures, mutual funds, or property — not to run its business, but to earn income or hold for growth — those are investments under AS 13. This standard tells you how to classify, value, and show them in the books.
Classification is the first big idea. AS 13 splits all investments into two buckets: Current Investments (intended to be held for less than one year, or readily realisable and meant to provide liquidity) and Long-term Investments (everything else — shares held strategically, debentures held to maturity, property held for capital appreciation). Think of it this way: if Rajesh & Co. Pvt. Ltd. buys shares of Infosys just to park surplus cash for 3 months, that's current. If they buy a 20% stake in a supplier to cement a business relationship, that's long-term.
Valuation is where students lose marks. Current investments are carried at the lower of cost or fair value (NRV), determined either item by item or by category — but NOT overall portfolio. So if one script is up and another is down, you can't net them off. Long-term investments are carried at cost, BUT if there is a diminution other than temporary in value (e.g., the investee company is going bankrupt), you must write them down. The key phrase is other than temporary — a normal market dip doesn't trigger a write-down for long-term investments. When the investment recovers, the reversal is taken back to the P&L.
Cost of acquisition includes purchase price plus brokerage, stamp duty, and transfer fees — but NOT GST if it's recoverable. For bonus shares, the cost is nil (no cash paid); the original cost now spreads over a larger number of shares, reducing the per-share carrying cost. For rights shares, you pay for them, so cost = amount paid. If rights are renounced (sold), any proceeds reduce the cost of the original holding. Investment properties (land/building held for capital appreciation, not for use) are carried at cost less depreciation — treated like a long-term investment but disclosed separately.