the interest up to the date of transaction is paid in addition to the price in case of which quotation
Answers
Answer:
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Explanation:
Investment means to spend money outside the business in order to earn some income which are non-trading in nature.
Usually, money is invested in Government Bonds, Securities, Shares and Debentures of companies etc.
Answer:
Investments are made in two ways:
(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 Capital Reserve.
Again, Marketable Securities are of two types
A. Fixed Interest Bearing Securities,
B. Variable Interest Bearing Securities.
A. Fixed Interest Bearing Securities:
Fixed interest bearing securities mean where the rate of return is fixed, say 10%, 12% or 15%. The returns or income of such securities usually falls due on certain specific dates, as 30th June or 31st Dec. This is particularly appropriate in case of Govt. Bonds and Securities. For example, if we purchase 1,000, 10% Govt. Bonds @ Rs. 100 (interest is payable on 30th September or 31st March), we will have an income of Rs. 10,000; Rs. 5,000 falls due on 30th September and Rs. 5,000 on 31st March.
Explanation:
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