valuation of shares

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Querist : Anonymous

Querist : Anonymous (Querist)

27 August 2010 Sir,
i have a query regarding valuation of shares.
i know shares are valued at market price or purchase price, which ever is lower..
But this is a year end entry...
Now suppose if i buy 20 share of jain ltd for Rs. 1000 and after few days i again purchase 10 share for Rs. 1500 and then i Sell 20 shares for Rs. 1800.. then how much profit should i book in my books... is there any subscribed method like fifo or average....
please suggest... and if possible then please assist me with some guidence note or accounting standard... my email id is abhishekdugar2202@gmail.com
Thankyou

Aditya Maheshwari

Aditya Maheshwari (Expert)
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27 August 2010 It should be done on FIFO basis as per section 45(2A) in income tax.

For the purpose of accounts AS - 13 to be followed and valuation as per weighted average method.

Querist : Anonymous

Querist : Anonymous (Querist)

27 August 2010 sir can only find sec. 45(2) and that deals with transfer of capital asset into stock...
and as- 13 speaks that
Valuation of current investments on overall (or global) basis is NOT CONSIDERED appropriate. Sometimes, the concern of an enterprise may be with the value of a category of related current investments and not with each individual investment, and accordingly the investments may be carried at the lower of cost and fair value ...computed categorywise (i.e. equity shares, preference shares, convertible debentures, etc.). However, the more prudent and appropriate method is to carry investments individually at the lower of cost and fair value.

but Sir if you dnt follow any method.. then how willl you value the remaining shares i.e for remaining 10 shares... refer eg. above...

sir if possible explain via that illst. only
thank you.

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Aditya Maheshwari

Aditya Maheshwari (Expert)
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27 August 2010 section 45(2A)
[(2A) 55Where any person has had at any time during previous year any beneficial interest in any securities, then, any profits or gains arising from transfer made by the depository or participant of such beneficial interest in respect of securities shall be chargeable to income-tax as the income of the beneficial owner of the previous year in which such transfer took place and shall not be regarded as income of the depository who is deemed to be the registered owner of securities by virtue of sub-section (1) of section 10 of the Depositories Act, 1996, and for the purposes of—

(i) section 48; and

(ii) proviso to clause (42A) of section 2,

the cost of acquisition and the period of holding of any securities shall be determined on the basis of the first-in-first-out method.

Explanation.—For the purposes of this sub-section, the expressions “beneficial owner” 56, “depository” 56 and “security” 56 shall have the meanings respectively assigned to them in clauses (a), (e) and (l) of sub-section (1) of section 2 of the Depositories Act, 1996.]

Querist : Anonymous

Querist : Anonymous (Querist)

28 August 2010 Sir my query still not resolved...

Aditya Maheshwari

Aditya Maheshwari (Expert)
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28 August 2010 Ab kya reh gaya?

Income tax solved. For books

As per AS - 13
Disposal of Investments

On disposal of an investment, the difference between the carrying amount and the disposal proceeds, net of expenses, is recognised in the profit and loss statement.

When disposing of a part of the holding of an individual investment, the carrying amount to be allocated to that part is to be determined on the basis of the average carrying amount of the total holding of the investment.3