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CA Intermediate · Advanced Accounting · AS 9 Revenue Recognition

Bharat Tools Ltd. sold goods to Kiran Traders on 28 March 2026 for ₹6,00,000 on a 'sale or return' basis. Kiran Traders may return unsold goods within 60 days, and the buyer has not yet signified acceptance. Under AS 9, how should Bharat Tools Ltd. treat the transaction in the year ended 31 March 2026?

No revenue should be recognised in the year ended 31 March 2026. In a sale or return arrangement, the seller retains the significant risks of ownership until the buyer accepts the goods or the return period lapses, so the sale is not complete under AS 9.

  1. ARecognise full ₹6,00,000 as revenue since goods are delivered
  2. BRecognise no revenue until the buyer accepts the goods or the return period lapsesCorrect
  3. CRecognise 50% of the sale price as revenue
  4. DRecognise revenue on a cash basis when the buyer pays

Explanation

Under AS 9, revenue from sale of goods is recognised when significant risks and rewards of ownership pass to the buyer. In sale or return arrangements, where the buyer has not accepted and the return period has not expired, the risks remain with the seller. So no revenue is recognised at 31 March 2026. Option A ignores the right of return.

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