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Accounting For Long Term Investments Notes

Institution: Kenyatta University

Course: Bachelor of Commerce

Content Category: Lecture Notes

Posted By: Kipkiruikagawa

Document Type: PDF

Number of Pages: 7

Price: KES 200
 
    

Views: 438     Downloads: 4

Summary

ACCOUNTING FOR LONG TERM INVESTMENTS.
Introduction
Investments are a part of current assets which is a consequence of excess cash and therefore need to be accounted for. The long-term investments are not current assets, because they do not represent resources available to meet working capital needs

Objectives
Objectives by the end of this topic you should be able to:
i. Apply methods of valuation of investments.
ii. Recognise investments into books of accounts.
iii. Present investments in financial statements.

Introduction
The basis of distinction between the asset categories of short-term investments and long-term investments lies in the nature and purpose of the investment. Investments that are readily marketable and which can be sold without disrupting business relationships or impairing the operating efficiency of the business enterprise are classified as current assets. Investments made to foster operational relationships with other enterprises are classified as long-term investments. Also, investments that do not meet the test of ready marketability are considered long-term, even if these investments do not promote business relationships. Long-term investments usually are listed below the current asset section of the balance sheet.
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