Skip to content

CA Intermediate · Advanced Accounting · AS 9 Revenue Recognition

Gandhi Software Ltd licenses software to Pune Mills for Rs 12,00,000 and also agrees to provide maintenance support for 3 years from 1 January 2025, included in the fee. The company estimates the maintenance element's value at Rs 3,60,000 over 3 years, and the remainder relates to the licence delivered on 1 January 2025. Ignoring any other factors, what revenue should be recognised for the year ended 31 March 2025?

Revenue of Rs 8,70,000 should be recognised. The licence portion of Rs 8,40,000 is recognised on delivery, while the Rs 3,60,000 maintenance element is spread over 36 months, giving Rs 30,000 for the three months elapsed. The two together total Rs 8,70,000.

  1. ARs 12,00,000
  2. BRs 8,40,000
  3. CRs 8,70,000Correct
  4. DRs 3,60,000

Explanation

Licence element = 12,00,000 - 3,60,000 = Rs 8,40,000, recognised on delivery. Maintenance of Rs 3,60,000 is spread over 36 months, i.e. Rs 10,000 per month; for 3 months = Rs 30,000. Total = 8,40,000 + 30,000 = Rs 8,70,000. Rs 8,40,000 omits the maintenance accrual.

Did you get it right without looking?

One question tells you little. A timed set on AS 9 Revenue Recognition shows your real accuracy, how long you take and where you lose marks.

Practise AS 9 Revenue RecognitionFree diagnostic mock

More AS 9 Revenue Recognition questions