Mr X purchased 500 shares Cost of original lot ,purchased on cum right basis- 20,000(20 per share)
Cost of shares after becoming ex right- 19000(19 per share)
Mr X now sells the shares at 3 each.
SOLUTION : Bank a/d DR 1500
To Investment a/c 1000
To Income a/c 500
Query: Why isn't the whole amount credited to the Investment account? What is the need to credit 500 to income a/c? Is it an alternative treatment?
We credit the investment account with the book value(purchase price) when they are sold. and the difference between the sale price and book value is either profit or loss so the income account is debited (in case of loss) and credited (in case of profit). it is not an alternative treatment. instead it is the only treatment
Oh ,now I get it :) Thankyou for your reply!
CAclubindia
