Question

1 point
On 31 March 2018 ,HCL Ltd
purchased Rs 100000 6%
Government bonds (face value
Rs 100 each) at Rs 95 ex -
interest. Interest is payable on
30 June and 31 December
every year. The amount of
accrued interest is *
​

Answer 1

Answer:

(a) As Trade Investments:

The investments which are made permanently for a regular income outside the business is known as Trade Investment. These are treated as fixed assets. That is why if this type of investments are sold at a profit, profit on such sale of investment is transferred to Capital Reserve Account and not to Profit and Loss Account.

(b) As Marketable Securities:

Sometimes a business wants to invest its idle cash purely on a temporary basis (of course, if the rate of earning is higher than cost of capital). This type of investment is known as Marketable Securities and is treated as Current Assets. That is why profit or sale of such investments is transferred to Profit and Loss Account and not to