JOURNAL ENTRIES FOR PURCHASING SHARES

In this article we will provide the information related to the Journal Entries for purchasing shares. When you purchase shares and incur brokerage and other expenses, it’s important to accurately record these transactions in your financial records.

Here are the simple journal entries for these actions:

 

WHEN YOU BUY SHARES

 

 Investment in Shares Account Dr. (Debit) 

   To record the purchase of shares

 

 Bank Account Cr. (Credit) 

   To show the payment made for the shares

 

When You Pay Brokerage And Other Share Buying Expenses

 

 Brokerage and Other Share Buying Expenses Account Dr. (Debit) 

To account for the expenses incurred, including brokerage, GST, STT (Security Transaction Tax), and Stamp Duty

 

 Bank Account Cr. (Credit) 

 To record the payment of these expenses from your bank account

 

When You Transfer Expenses To The Buying Cost Of Shares

 

 Investment in Shares Account Dr. (Debit) 

To increase the cost of your investment in shares by transferring the expenses

 

 Brokerage and Other Share Buying Expenses Account Cr. (Credit) 

To show that the expenses are no longer separate but have been added to the investment cost

 

Now, let’s illustrate this with an example: You bought KEI Industries shares (2 shares at a rate of Rs. 410.45 per share) and NIIT shares (3 shares at a rate of Rs. 102.75 per share). You also paid brokerage per unit  Rs. 2.05 for KEI and Rs. 0.51 for NIIT.

 

WHEN YOU BOUGHT THE SHARES OF COMPANIES

 

 Investment in KEI IND. Shares Account Dr. Rs. 820.90 

   (2 shares x Rs. 410.45 per share)

 

 Investment in NIIT Shares Account Dr. Rs. 308.25 

   (3 shares x Rs. 102.75 per share)

 

 Bank Account Cr. Rs. 1129.15 

   (Total payment for shares)

 

WHEN YOU PAID BROKERAGES AND OTHER EXPENSES

(including GST, STT, and Stamp Duty)

 

 Brokerage on KEI Shares Dr. Rs. 4.10 

   (2 shares x Rs. 2.05 per share)

 

 Brokerage on NIIT Shares Dr. Rs. 1.53 

   (3 shares x Rs. 0.51 per share)

 

 STT on KEI Dr. Rs. 0.69

 

 STT on NIIT Dr. Rs. 0.31

 

 GST on Total Brokerage Dr. Rs. 1.02

 

 Stamp Duty Account Dr. Rs. 1.00

 

 Bank Account Cr. Rs. 8.65 

   (Total payment for expenses)

 

WHEN YOU TRANSFER THESE EXPENSES TO INVESTMENT IN SHARE ACCOUNT

 

 Investment in KEI and NIIT Shares Account Dr. Rs. 8.65 

   (To increase the cost of your investment in shares)

 

 Brokerage and Other Expenses Account Cr. Rs. 8.65 

   (To show that the expenses have been added to the investment cost)

 

 

 

Now, your total cost of investment in KEI and NIIT shares is

 Rs. 1129.15 (purchase cost)

 + Rs. 8.65 (expenses)

= Rs. 1137.84.

This accurately reflects the true cost of your investment in shares, taking into account both the purchase price and associated expenses.