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CA Intermediate · Advanced Accounting · AS 9 Revenue Recognition

Arjun Publishers Ltd. sold 5,000 books to a retailer at Rs 200 each on 20 March 2025, with the buyer having a right to return unsold books within 60 days. The company cannot reliably estimate returns, so there is significant uncertainty about the amount of consideration. Also on 25 March 2025 it sold goods of Rs 3,00,000 to another customer who accepted delivery without any condition, with collection reasonably certain. What total revenue should Arjun recognise for the year ended 31 March 2025 as per AS 9?

Total revenue is Rs 3,00,000. The retailer sale of Rs 10,00,000 cannot be recognised yet because returns cannot be reliably estimated and so significant uncertainty remains, while the unconditional sale of Rs 3,00,000 meets the AS 9 conditions and is recognised.

  1. ARs 13,00,000
  2. BRs 3,00,000Correct
  3. CRs 10,00,000
  4. DNil

Explanation

Where the buyer can return goods and the seller cannot reliably estimate returns, the significant uncertainty means the risks and rewards are not effectively transferred, so revenue is not recognised on the first sale until the return period lapses or acceptance. The first sale would be 5,000 x 200 = Rs 10,00,000, which is deferred. Only the unconditional sale of Rs 3,00,000 qualifies. Rs 13,00,000 wrongly includes the first sale.

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