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CA Intermediate · Advanced Accounting · AS 13 Accounting for Investments

Meenakshi Textiles Ltd. acquired 2,000 equity shares of Kaveri Mills Ltd. as a long-term investment for Rs 150 per share and paid brokerage of Rs 3,000 and stamp duty of Rs 1,000. As per AS 13, at what amount should the investment be initially recorded?

The investment is recorded at Rs 3,04,000. Under AS 13, cost includes the purchase price plus acquisition charges such as brokerage, fees and duties. So 3,00,000 of share price, 3,000 brokerage and 1,000 stamp duty are all capitalised into the cost of the shares.

  1. ARs 3,00,000
  2. BRs 3,03,000
  3. CRs 3,04,000Correct
  4. DRs 3,01,000

Explanation

Cost of an investment includes acquisition charges such as brokerage, fees and duties. Cost = 2,000 x 150 = 3,00,000 + 3,000 + 1,000 = Rs 3,04,000. Excluding stamp duty gives Rs 3,03,000, which is wrong because duties form part of cost.

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