Page 117 - Accountancy_F5

Once a CDS account is opened, an investor (b) Explain procedures that Mr. Mipango
can buy security by filling purchase order will be required to accomplish to
form, an individual’s information form, invest in a financial asset that you
and then depositing money. Corporate have advised him in (a) above.
investors are required to submit a certificate (c ) Prepare your advise note that you
of incorporation instead of an individual’s will be shared to your friends.
FOR ONLINE READING ONLY
information sheet. Other procedures Investment in shares and
remain the same as it is for the individual their accounting treatments
investor. Similarly, when an individual Investment in ordinary shares, just like
investor wants to sell the shares, the original other financial instruments, is considered
LANGUAGE EDITING
certificate of deposit is submitted to the an asset to an investor. In the books of
broker together with filling out the sale account, an investor is required to maintain
order form and submitting payment details. separate investment accounts for each type
For a corporate investor, a signed letter of investment. For the case of ordinary
from the company authorising the sale is shares, the amount given out during the
also required in addition to submitting the acquisition of an asset is the capital and
original certificate of deposit and filling out the amount received from the asset is an
the sale order form. The process of buying income received in the form of dividend.
and selling financial assets can be facilitated By definition, dividend refers to a reward,
through a broker. cash or otherwise, that a company gives to

Activity 4.2 its shareholders. Dividends can be issued
Mr. Mipango is the father of your best in various forms, such as cash payment,
friend. He is expecting to retire from stock or any other form.
government employment at the end of As for accounting treatment, the total cost of
this year. He is worried that, he will not investment including acquisition expenses
be able to finance university studies of his
son who is expected to join after finishing is usually debited to the investment
form six, which is two years from now. account. It is common for an investor to
Therefore, Mipango is planning to set incur additional expenses (for example,
aside TZS 5,000,000 out of his retirement brokerage fees) besides the price paid in the
pension benefit to invest in a financial acquisition of common stock. Thus, the full
asset that will generate income to finance cost of an investment is a summation of the
his son’s university education. price of the stock plus additional expenses.
Required: An investment account has three columns
(a) Advice Mr. Mipango, on whether
he should invest in short-term or on both sides: the debit side and the credit
long-term financial assets by giving side. The following are the details, which
him reasons of why should choose are recorded in each of the columns:
that option?

Student’s Book Form Five
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