Pratham and Associates is a manufacturer of steel rods. It invests its profits by purchasing shares of listed companies in order to earn dividend…

CA Intermediate · Advanced Accounting · MTP · May 2024
Pratham and Associates is a manufacturer of steel rods. It invests its profits by purchasing shares of listed companies in order to earn dividend income. It had purchased shares of Bharti Airtel Limited in FY 2018-19. However, it sold all the shares of Bharti Airtel Limited during the current year i.e. FY 2023-24. What amount would be disclosed in the profit and loss account for FY 2023-24?
(A) This transaction would not affect the profit and loss account since the primary business of the company is manufacturing, and not investment.
(B) The carrying amount net of expenses would be disclosed in the profit and loss account.
(C) The disposal proceeds net of expenses would be disclosed in the profit and loss account.
(D) The difference between the carrying amount and the disposal proceeds, net of expenses, would be disclosed in the profit and loss account.

Suggested Answer and Working Notes:

Correct Answer: Option (D)

The difference between the carrying amount and the disposal proceeds, net of expenses, would be disclosed in the profit and loss account.

Topics: AS 21

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