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investment accounts

In investment accounts "xy ltd purchased 15000 equity shares of ABC ltd (face value Rs:10)and on 1 June again purchased 5000 shares for 100000 ABC ltd announced 1:5 bonus shares and on 1sep ABC ltd issued right shares 1:6 @20% premium and no dividend is payable on right shares , Dividend declared by ABC ltd @20% on 31.3.09 which was received by xy ltd on 31oct 2009 " sir in this question dividend received on 15000 shares were written on the interest column but dividend received on 1 June was adjusted in cost column I didn't understood why they adjusted dividend received on 1 June to cost column sir plz explain why they did so

asked Oct 3, 2016 in General by Pooja (2 points) 48 views

1 Answer

0 votes
Please note that 15000 shares were held by  XY Ltd on 31/3/2009, hence dividend received on thathem is an income, hence taken in the interest column.  On June 1 again 5000 shares were bought for Rs.100000.  Obviously this purchase price of Rs.100000 includes payment of dividend which XY will receive. Rightfully the dividend belongs to the previous owner of these shares. That is why that dividend was added by the previous owner in the cost of shares.   Hence dividend received for share, purchased on June 1, 2009 is not treated as an income but used to reduce the cost of shares.
answered Oct 3, 2016 by jbsclasses (3,969 points)