Skip to content

Advanced Accounting · AS 9 Revenue Recognition

AS 9 Revenue from Rendering of Services: Proportionate Completion and Completed Service Contract Methods

Updated 4 October 2026 · Fact-checked

Under AS 9, revenue from services is recognised as the service is performed. The proportionate completion method spreads revenue over the acts performed. The completed service contract method recognises revenue only when the whole service is done. Use the first for services with several acts, the second for a single act or when the final act is critical.

Understand Revenue from Rendering of Services

A service is not delivered in one moment like goods. A coaching course, a maintenance contract or a repair job takes time. AS 9 asks: when has the seller earned the revenue? Its answer is: as the service is performed, not when cash is received.

AS 9 gives two methods. Under the proportionate completion method, revenue is recognised in proportion to the service performed. Performance consists of the execution of more than one act, and revenue is recognised on each act, based on the proportion the act bears to the total service. Under the completed service contract method, revenue is recognised when the rendering of the service is completed, or substantially completed if the service is performed in a single act or the last act is so significant that it determines when the service is complete.

You must also know the condition for recognition. Revenue is recognised only if there is no significant uncertainty about the amount of consideration that will be received. If the collectability of an amount already recognised becomes doubtful, you do not reverse the revenue. You make a separate provision for the doubtful amount (a bad debt expense).

The costs of the service are matched with the revenue recognised. Under proportionate completion, the costs related to the acts performed are charged to profit and loss. Under completed service contract, costs incurred are carried forward as work in progress until the service is complete, then charged against revenue.

In exams, the key skill is choosing the right method from the wording. Many acts, or an instalment pattern: proportionate completion. One act, or a final critical act such as a final inspection or approval that decides completion: completed service contract.

Key rules to remember

Proportionate completion: revenue for a period
Revenue = Total contract fee × (Service performed ÷ Total service)
Measure performance by acts, days, units, or cost proportion, as the question gives. Use the basis stated in the question.
Completed service contract method
Revenue = Total fee, recognised when the service is completed or substantially completed
Before that date, revenue is nil and costs are carried forward as work in progress.
Revenue for a later period
Revenue of the period = Cumulative revenue to date − Revenue recognised in earlier periods
Always compute cumulative first, then subtract what was recognised earlier.
Recognition condition
No significant uncertainty about the consideration to be received
If collection of an already recognised amount becomes doubtful, provide for it as an expense. Do not reverse the revenue.

How to solve Revenue from Rendering of Services questions

Use this order for any AS 9 services question.

  1. 1Read the facts and decide whether the service is performed in many acts or in a single act or with a critical final act.
  2. 2Choose the method: proportionate completion for many acts, completed service contract for a single or critical final act.
  3. 3Note the total fee and check that there is no significant uncertainty about collecting it.
  4. 4For proportionate completion, find the proportion of service performed in each period, using the basis the question gives (acts, days, units or cost).
  5. 5Compute cumulative revenue to date, then subtract earlier recognised revenue to get the revenue for the period.
  6. 6Match the related costs: charge them as expense under proportionate completion; carry them as work in progress under completed service contract until completion.
  7. 7Compute profit or loss for the period and show the effect of any doubtful collection as a separate provision.
  8. 8State the method used and the reason in one line, since this earns marks.

Quickest way: Method choice first, then one multiplication

When to use it: Use this under time pressure, in both MCQs and short written answers.

  1. Underline the words that signal the method: 'several acts', 'instalments', 'monthly' point to proportionate completion; 'single act', 'final approval', 'on completion' point to completed service contract.
  2. In an MCQ, eliminate any option that recognises full revenue before completion under a single-act service, and any option that reverses revenue for doubtful debt.
  3. Write the formula: Fee × proportion performed. Compute cumulative, then subtract earlier revenue.
  4. In written answers, use this layout: Method and reason, Working note with the proportion, Revenue, Cost, Profit. Each line earns a step mark.
  5. Finish with one line of conclusion, for example 'Revenue of ₹X is recognised in this year and ₹Y is deferred.'

Common mistakes in Revenue from Rendering of Services

  • Recognising revenue when cash is received

    Students link revenue with receipts, especially for advance fees.

    Fix: Revenue follows performance of the service. Advance received is a liability until the service is performed.

  • Using proportionate completion for a service with one critical final act

    Students apply the formula automatically without reading the nature of the service.

    Fix: If the last act is so significant that it decides completion, use the completed service contract method and recognise revenue at completion.

  • Reversing revenue when collection becomes doubtful

    Students treat doubtful collection as a revenue adjustment.

    Fix: Keep the revenue. Make a separate provision for the doubtful amount as an expense.

  • Forgetting to subtract revenue of earlier periods

    Students apply the cumulative proportion to the current year only.

    Fix: Revenue of the period = cumulative revenue − revenue already recognised.

  • Charging all costs to profit and loss under the completed service contract method before completion

    Students match costs with the cash paid, not with revenue.

    Fix: Carry costs as work in progress until completion, then charge them against the revenue.

Worked examples

Example 1

Sharma Training Ltd. enters into a contract to provide 10 training sessions for a total fee of ₹5,00,000. In year 1, 4 sessions were held, and in year 2, the remaining 6 sessions were held. Each session costs ₹30,000 to deliver. Determine the revenue, cost and profit for each year.

Show the solution
  1. Method: The service consists of several similar acts (sessions), so use the proportionate completion method.
  2. Revenue per session = ₹5,00,000 ÷ 10 = ₹50,000.
  3. Year 1 revenue = 4 × ₹50,000 = ₹2,00,000.
  4. Year 2 revenue = 6 × ₹50,000 = ₹3,00,000.
  5. Year 1 cost = 4 × ₹30,000 = ₹1,20,000. Year 2 cost = 6 × ₹30,000 = ₹1,80,000.
  6. Year 1 profit = ₹2,00,000 − ₹1,20,000 = ₹80,000.
  7. Year 2 profit = ₹3,00,000 − ₹1,80,000 = ₹1,20,000.

Answer: Year 1: revenue ₹2,00,000, cost ₹1,20,000, profit ₹80,000. Year 2: revenue ₹3,00,000, cost ₹1,80,000, profit ₹1,20,000. Total profit ₹2,00,000.

Example 2

Mehta Associates agrees to carry out a special audit-type review for a fee of ₹6,00,000. The review report is issued only after a final approval by a regulator, which is the critical act deciding completion. Costs incurred: ₹2,50,000 in year 1 and ₹1,00,000 in year 2, when the report was approved. Show revenue, costs charged and profit for each year.

Show the solution
  1. Method: The final approval is the critical act that decides completion, so use the completed service contract method.
  2. Year 1: the service is not complete, so revenue is nil.
  3. Year 1: costs of ₹2,50,000 are carried forward as work in progress. Profit or loss for the year is nil.
  4. Year 2: the service is completed, so recognise the full fee of ₹6,00,000.
  5. Year 2: charge total costs = ₹2,50,000 + ₹1,00,000 = ₹3,50,000.
  6. Year 2 profit = ₹6,00,000 − ₹3,50,000 = ₹2,50,000.

Answer: Year 1: revenue nil, no profit, ₹2,50,000 carried as work in progress. Year 2: revenue ₹6,00,000, cost ₹3,50,000, profit ₹2,50,000.

Exam tips

  • State the method and the reason in your first line. Examiners award marks for choosing the method correctly.
  • Check the wording for 'acts', 'instalments' or a 'critical final act' before you choose.
  • Show the revenue-per-act or cumulative working separately so you earn step marks even if one figure is wrong.
  • For doubtful collection, show a separate provision. Do not reduce revenue.
  • In MCQs, test each option against the rule: no revenue before completion for a single-act service, and no reversal of revenue for doubtful debts.

Practice questions from AS 9 Revenue Recognition

Revenue from Rendering of Services in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Revenue from Rendering of Services: frequently asked questions

What is the difference between the proportionate completion method and the completed service contract method?

Under proportionate completion, revenue is recognised as each act of the service is performed. Under completed service contract, revenue is recognised only when the service is completed or substantially completed. The first suits services with many acts. The second suits a single act or a service with a critical final act.

When do I use the completed service contract method?

Use it when the service is performed in a single act, or when the last act is so significant that it decides when the service is complete. Until then, revenue is not recognised and costs are carried as work in progress.

What if the amount recognised as service revenue may not be collected?

Do not reverse the revenue already recognised. Make a separate provision for the doubtful amount and show it as an expense. If there is significant uncertainty about collection at the start, revenue is not recognised at that time.

Is advance fee received treated as revenue?

No. Advance fee is a liability until the service is performed. Revenue is recognised only as the service is rendered under the applicable method.