Skip to content

CA Intermediate · Advanced Accounting · AS 13 Accounting for Investments

On 1 October 2025, Kapoor Traders Ltd. bought 2,000 debentures of Rs 100 each in Sundaram Finance Ltd. at Rs 105 per debenture cum-interest. The debentures carry 12% annual interest, payable on 30 June and 31 December. No brokerage was paid. What is the cost of the investment to be recorded?

The cost of the investment is Rs 2,04,000. The total price paid of Rs 2,10,000 includes Rs 6,000 of interest accrued for three months before purchase. That pre-acquisition interest is deducted from the price, because it is a recovery of interest and not part of cost.

  1. ARs 2,10,000
  2. BRs 2,04,000Correct
  3. CRs 2,16,000
  4. DRs 1,98,000

Explanation

Total price paid is 2,000 × 105 = Rs 2,10,000. Interest accrued for 1 July to 30 September (3 months) is 2,00,000 × 12% × 3/12 = Rs 6,000. This pre-acquisition interest is not part of cost, so it is debited to interest receivable or the interest account. Cost = 2,10,000 − 6,000 = Rs 2,04,000. Rs 2,10,000 wrongly capitalises the accrued interest.

Did you get it right without looking?

One question tells you little. A timed set on AS 13 Accounting for Investments shows your real accuracy, how long you take and where you lose marks.

Practise AS 13 Accounting for InvestmentsFree diagnostic mock

More AS 13 Accounting for Investments questions