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CA Intermediate · Advanced Accounting · AS 9 Revenue Recognition

Aditi Estates Ltd. sold a plot to Rohan for ₹50,00,000 on 10 March 2025. Registration of the sale deed and handover of possession took place on 5 April 2025. Rohan paid an advance of ₹10,00,000 on 10 March 2025. The financial year ends 31 March 2025. Under AS 9, the treatment at 31 March 2025 is:

No revenue is recognised at 31 March 2025. Ownership and possession transfer only on 5 April 2025, so significant risks and rewards have not yet passed. The ₹10,00,000 received is shown as an advance from customer.

  1. ARecognise revenue ₹50,00,000
  2. BRecognise revenue ₹10,00,000
  3. CRecognise no revenue; show ₹10,00,000 as advance receivedCorrect
  4. DRecognise revenue ₹40,00,000

Explanation

Sale of goods (including real estate) is recognised when property in the goods and significant risks and rewards pass to the buyer. Here transfer occurs on registration and possession on 5 April 2025, i.e. in the next year. The ₹10,00,000 received is an advance, a liability, not revenue.

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