Types of investment

Types of investment:- There are three types of investment

i) Available-for-sale

ii) Trading security

iii) Held to Maturity Security

 

i) Investment in Available-for-sale securities:- Available-for-sale means the investment which is not held in active trading account for immediate resale nor to be held to maturity. This type of investment is reported at fair value and the unrealized gain and loss is recognized and reported directly in shareholders’ equity.

ii) Investment in Trading securities:- Trading securities means the investment held in active trading account for immediate resale. This type of investment is reported at fair value and the unrealized gain and loss is recognized in statement of comprehensive income or profit and loss account.

iii) Investment in Held to maturity Securities:- Held to maturity Securities means which is held until maturity. This type of investment is reported at cost value and the unrealized holding gain and loss is not recognized.

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What is Cost allocation base

Cost allocation base:- Cost allocation base is some factor or variable that is used to allocate costs in a cost pool to cost objects. An example of a cost allocation base may be the weight of materials handled for each production department that uses material handling services.This base would be used to assign the costs in the material handling cost pool to the production departments.

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What is Cost pool

Cost pool: Cost pool is a collection of costs that are to be assigned to cost objects. Costs are often pooled because they have the same cost driver.  An example of a cost pool is all costs related to material handling in a manufacturing firm.

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What is Cost object

Cost object:- Cost object is something which is assigned a separate measure of cost because management needs such cost information; for example, responsibility centers, products, projects and so on. The various production departments in a manufacturing firm also provide examples of cost objects. For example, the material handling cost pool may be allocated across the various production departments that use material handling services.

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What is Market Value

Market Value:- Market Value is the current price at which share of stock may be bought or sold. When a stock is traded on an organized stock exchange, the market price is quoted daily in the financial press. Market price is based upon a combination of factors, including investors’ expectation of future earning, dividend yield, interest rates and alternative investment opportunities, etc.

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What is Book Value

Book Value:- Book Value is the amount of net assets presented by each share of common stock. Book value may be either higher or lower than the current market value; however it may give an indication of reasonableness of the current market price.

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