## Maintaining the Investment Ledger Account: Three-Column Format

### Why Three Columns?

For interest-bearing securities (debentures, bonds), you maintain three separate columns to track:

Column	What it tracks
NV (Face Value/Nominal Value)	Quantity × Face Value — never changes
Int (Interest)	Accrued interest paid/received — flows to P&L
Cost (Ex-Int)	Actual investment cost — used for profit/loss on sale

The NV column is a quantity control — it must balance so that you account for all units.

### Cost of Investment Under AS 13

Cost = Ex-Interest Purchase Price + Brokerage/Fees

> Brokerage is added to Cost, NOT to Interest.

### Ex-Interest Treatment on Purchase

When buying a debenture mid-way through an interest period, you pay: `Price + Accrued Interest`. This split is:

Price (Ex-Int) + Brokerage → Cost column (Dr)
Accrued Interest paid → Int column (Dr)

### Ex-Interest Treatment on Sale

Sale proceeds are split similarly:

Net Sale Price (Ex-Int) = Gross Sale Price − Brokerage → Cost column (Cr)
Accrued Interest received on sale → Int column (Cr)

> Key Rule: If sale happens just 1 day after the interest due date, no interest is accrued to the buyer — the seller just collected it. Hence no Int entry on that sale.

### Interest Received on Due Date

Dr. Bank (CIB)
Cr. Int column of Investment A/c ← clears the Int column

### Year-End Closing

1. NV column: carry forward balance.

2. Int column: if a due date hasn't arrived yet, accrue interest (Dr. Int Receivable, Cr. Int Income) — but do not put it in the Int column of Investment A/c.

3. Cost column: transfer balance to next year as opening balance.

4. Net Int balance: transfer to P&L as interest income.

Worked example

### Example 1

CDR Problem – 8% Debentures (FIFO, with Brokerage)

Opening Balance: NV 1,20,000 | Cost 1,18,000 (i.e., 1,200 Debs @ Face ₹100, Cost ₹98.33 avg)

01.07.X1 – Purchase 100 Debs @ ₹98 (Ex-Int), Brokerage 1%:

```

Ex-Int Cost = 100 × 98 = 9,800

Brokerage = 9,800 × 1% = 98

Total Cost = 9,898 → Cost column Dr.

Int paid (3m) = 100 × 100 × 8% × 3/12 = 200 → Int column Dr.

```

Sale on 01.10.X1 – 200 Debs @ ₹99 (Ex-Int), Brokerage 1%:

```

Gross Sale = 200 × 99 = 19,800

Brokerage = 198

Net Sale Price = 19,602 → Cost column Cr. (approx 19,667 CA under FIFO)

```

Note: Sale is 1 day after 30.09 interest due date → No accrued interest on sale.

FIFO Cost of 200 Debs sold:

Opening had Debs @ ₹98.33 (cost)
200 × 98.33 = 19,667

Profit on sale = 19,800 − 19,667 = ₹133

```

Bank A/c Dr. 19,800

To Investment 19,667

To P&L (Profit) 133

```

Interest accrued on sale (from 01.07 to 01.10 = 3m):

200 × 100 × 8% × 3/12 = ₹400 (if due date is mid-period — but here sale is 1 day post due date, so nil)

Year-End Valuation (Current Investment):

Cost balance (from ledger) = ₹93,513
Market Value = ₹94,050 (950 Debs × ₹99)
Valued at ₹93,513 (lower of cost or MV)

No write-down needed here since cost < MV.

⚠️ Common exam mistakes

Adding brokerage to the Interest column instead of the Cost column.
Netting off interest paid on purchase against interest received later — they must be tracked separately in the Int column.
Forgetting to deduct brokerage from sale proceeds before recording in Cost column.
Treating accrued interest on sale as revenue when the sale happens the day after a due date — no interest accrues to the buyer in that case.
Mixing cost lots: under FIFO, the oldest lot's unit cost must be used first, even if the opening balance average differs from recent purchases.

Bare-Act text Paragraph 13 · AS 13 – Accounting for Investments · click to expand

The cost of an investment includes acquisition charges such as brokerage, fees and duties. If an investment is acquired in exchange for another asset, the acquisition cost of the investment is determined by reference to the fair value of the asset given up.

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Three-Column Investment Ledger – Ex-Interest, Brokerage, and FIFO

Worked example

⚠️ Common exam mistakes