Page 110 - Accountancy_F5

Chapter
Investment Accounting
Chapter four: Investment Accounting
Four

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Introduction

Reporting investment records raises a deep understanding of financial markets,
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portfolio management, and risk analysis. In this chapter, you will learn the meaning,
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types and terminologies. Also, you will learn how to prepare and maintain accounting
records related to equity-based investments. The competencies developed will enable
you to demonstrate the concepts and principles applied in the accounting of investments
and prepare and maintain accounting records related to equity-based investments.

A business without investment money with someone trusted), it is better
to invest because it will generate more
money than the current amount. The extra
Meaning of investment and income to be generated will compensate
other associated terms for the time passage, the inflation level
An investment is an asset item acquired with that tends to erode the value of money and
the goal of earning income or for capital the uncertainty in the future payments.
appreciation or both. Capital appreciation The person who invests is known as an
refers to an increase in the value of an asset “investor” and can be an individual, a
over time. When an individual purchases government, an institution (pension funds),
an asset as investment, the intention is not or a corporation. Meanwhile, investments
to consume such asset rather using it in can be done in real assets such as plants and
the future to create wealth. The amount
used to invest can either be a surplus from equipment, real estate, or in financial assets
current spending needs or a fund generated including shares and bonds. However, as
deliberately for investment purposes. identified in the introductory subsection, the
Surplus income occurs when the income chapter focuses on investments in financial
level exceeds the spending needs. Instead assets, specifically ordinary shares (equity
of keeping any surplus income in options securities) and bonds (which are fixed
that will not attract more income/return income securities). The following are some
in the future (example under a mattress of the key terms associated with investments
or bury it in the backyard or keep the in financial assets:

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