Question

X Ltd. provides you the following information:

	₹
Non-Current Investments as on 31-3-2021	50,000
Non-Current Investments as on 31-3-2022	60,000

During the year 2022, X Ltd. purchased investments costing ₹ 25,000 and sold some investments at a loss of 20% on book value. Calculate sources of cash.

Answer 1

Dr.	Non-Current Investments A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Balance b/d	50,000	By Bank A/c (Sale Proceeds)	12,000
To Bank A/c (Purchases)	25,000	By P&L A/c (Loss 20% of ₹15,000)	3,000
		By Balance c/d	60,000
Total	75,000	Total	75,000

Working Note 1:

Let the book value of investments sold = ₹ x

Since the company purchased ₹ 25,000 in new investments and still ended with ₹ 60,000, then it flows as:

Opening Investment + Purchases − Book Value Sold = Closing Balance

₹ 50,000 + ₹ 25,000 − x = ₹ 60,000

∴ ₹ 75,000 − x = ₹ 60,000 

∴ x = ₹ 15,000

∴ Book Value of Investments Sold = ₹ 15,000

Working Note 2:

Calculate Cash Received from Sale (Sources of Cash),

Given is sold at a 20% loss on book value,

∴ Sale proceeds = 80% of ₹ 15,000

∴ Sale proceeds = ₹ 12,000