Page 275 - Corporate Finance PDF Final new link

NPP

BRILLIANT’S Investment Accounting 275

Solution:
In the Books of Brothers Ltd.
6% Government Stock Account
Dr. [Interest Payable: 30th June & 31st December] Cr.
Date Particulars Nominal Inter- Cost Date Particulars Nominal Inter- Cost
Value est (`) (`) Value est (`) (`)
2018 2018
Mar. 31 To Bank A/c 2,00,000 3,000 1,90,000 Jun. 30 By Bank A/c - 6,000 -
Dec. 31 To State- Dec. 31 By Bank A/c - 6,000 -
ment of P&L - 9,000 - Dec. 31 By Bal. c/d 2,00,000 - 1,90,000
2,00,000 12,000 1,90,000 2,00,000 12,000 1,90,000

 ` 2,00,000 
On 31st March, 2018 Brothers Ltd. purchased 2,000 stocks   @ ` 95 ex-interest.
 100 
Brothers Ltd. will have to pay ` 1,90,000 (` 95 × 200) plus accrued interest for 3 months
(January, February and March) ` 3,000.
Therefore, total payment will be ` 1,93,000. Investment Account will be debited with ` 1,90,000
and Interest Account will be debited with ` 3,000.
The Bank Account will be credited with ` 1,93,000.
On 30th June, 2018, Interest will be received on ` 2,00,000 for the entire 6 months.
Net income from interest ` 6,000 + ` 6,000 - ` 3,000 = ` 9,000 will be credited to Profit and Loss
Account/Statement of Profit and Loss.
(iii) Cum-interest/Dividend Sales (iii) H$‘-B§Q>aoñQ>/{S>{dS>|S> goëg
When securities are sold ‘cum-interest’, the O~ {g³¶mo[aQ>rO H$mo 'H$‘-B§Q>aoñQ>' na ~oMm OmVm
sale proceeds consists of accrued interest also. h¡ Vmo {dH«$¶ H$m¶©dmhr ‘| A{O©V ã¶mO ^r gpå‘{bV hmoVm
Interest account will be credited with the ac- h¡& B§Q>aoñQ> AH$mC§Q> H$mo A{O©V ã¶mO go H«o${S>Q> {H$¶m
crued interest and the Investment Account will
be credited with the balance amount. The Bank Om¶oJm VWm B§doñQ>‘|Q> AH$mC§Q> H$mo eof am{e go H«o${S>Q>
Account will be debited with the quotation {H$¶m Om¶oJm&>~¢H$ AH$mC§Q> H$mo H$moQ>oeZ ‘yë¶ go S>o{~Q>
price. {H$¶m Om¶oJm&
Journal Entries / OZ©b E§Q´>rO
1. When investment is sold cum-interest
O~ B§doñQ>‘|Q> H$mo H$‘-B§Q>aoñQ> na ~oMm OmVm h¡
Bank Account Dr. [Quotation Price]
To Investment Account [Quotation Price less accrued
interest]
To Interest Account [Accrued interest]