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Question

How are book costs calculated?

Answer

Book costs are calculated on your portfolio as follows; Purchases are added directly to the existing book cost, so if all a client does is purchase shares, the book cost will be the sum of all purchases. When a client comes to sell shares, the percentage of the total holding sold is deducted to give the new book cost. The sale price does not affect the book cost.
Below is a simplified working example:

Client buys 100 BARC at 100p = £100
Client buys 100 BARC at 200p = £200
Client buys 200 BARC at 300p = £600

The client's holding is 400 BARC - book cost is £900

Client sells 100 BARC (25% of the holding) therefore, book cost reduces by 25%.

The client's holding is now 300 BARC - book cost of £675.

Client buys 100 BARC at 400p = £400

The client's holding is back to 400 BARC but the book cost is now £1,075.

 

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