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CA Intermediate · Advanced Accounting · AS 9 Revenue Recognition

Ganga Finance Ltd. lent ₹10,00,000 to Mohan Ltd. on 1 October 2024 at 12% p.a., interest payable annually on 30 September. The financial year ends 31 March 2025. Under AS 9, interest revenue to be recognised for the year ended 31 March 2025 is:

Interest revenue is ₹60,000. AS 9 requires interest to be recognised on a time proportion basis on the principal outstanding at the contracted rate, and only six months of the year have elapsed: ₹10,00,000 × 12% × 6/12.

  1. A₹1,20,000
  2. B₹60,000Correct
  3. C₹30,000
  4. D₹90,000

Explanation

Interest accrues on a time basis on the amount outstanding at the agreed rate. Period 1 Oct to 31 Mar = 6 months. 10,00,000 × 12% × 6/12 = ₹60,000. Recognising ₹1,20,000 would wrongly take a full year's interest.

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