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272 Corporate Finance BRILLIANT’S

Step 2: Calculate accrued interest by apply- MaU 2… {ZåZ{b{IV ’$m°‘y©bm à¶w³V H$aHo$ bJo ã¶mO H$s
ing the following formula: JUZm H$aZm&
Rate of interest × Period (in months)
Accrued Interest = × Face value of securities purchased
12

Step 3: Calculate cost as follows: MaU 3… bmJV H$s JUZm {ZåZ{b{IV àH$ma go H$a|…
Cost = (Quotation price × No. of securities purchased) Less accrued int. as calculated in Step 2.

Example: On 1st April, 2016, X Ltd. pur- CXmhaU… 1 Aà¡b 2016 H$mo X {b{‘Q>oS> Zo < 100
chased 2,000, 12% debentures of ` 100 each @ à˶oH$ H$m 2,000, 12% {S>~|Mg© < 98 (H$‘-B§Q>aoñQ>)
` 98 (cum-interest). Debenture interest is pay- na IarXm& {S>~|Ma B§Q>aoñQ> AY©dm{f©H$ ê$n go 30 OyZ VWm
able half-yearly, on 30th June and 31st Decem- 31 {Xgå~a H$mo ^wJVmZ {H$¶m OmVm h¡& AH$mC§Q> ~w³g H$s
ber. Date of closing the books of account is 31st ³bmoqOJ {XZm§H$ à{V df© 31 {Xg§~a h¡& bmJV VWm A{O©V
December every year. Cost and accrued inter-
est are to be calculated as follows: ã¶mO H$s {ZåZ àH$ma go JUZm H$aZm h¡…
Step 1: Calculation of period (in month)
From 1.1.2016 to 31.3.2016 = 3 months.

3
Step 2: Accrued Interest = 12% × × ` 2,00,000
12
= ` 6,000.
Step 3: Cost = (` 98 × 2,000) = ` 1,96,000
Less: Accrued Interest = ` 6,000
= ` 1,90,000
Journal Entries / OZ©b E§Q´>rO
1. When investment is purchased cum-interest
O~ B§doñQ>‘|Q> H$‘-B§Q>aoñQ> na IarXm OmVm h¡&
Investment A/c Dr. [Cost]
Interest A/c Dr. [Accrued interest]
To Bank A/c [Quotation price]
2. When first interest is received on due date after pur-
chase
O~ nM}g Ho$ níMmV² {ZpíMV {XZm§H$ na nhbm ã¶mO àmá {H$¶m
OmVm h¡&
Bank A/c Dr.
To Interest Account [Whole amount of that period]