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CA Intermediate · Advanced Accounting · AS 9 Revenue Recognition

Ganga Software Ltd entered into a contract on 1 January 2025 to provide a 12-month maintenance service to a customer for Rs 7,20,000, billed and received in advance. Servicing effort is spread evenly over the period. In addition, on 1 February 2025 it sold a software licence to the same customer for Rs 3,00,000 with delivery completed and no further obligation. What total revenue should be recognised for the year ended 31 March 2025 from the two transactions?

Total revenue is Rs 4,80,000. Maintenance revenue is recognised proportionately over the service period, giving three months of Rs 7,20,000, which is Rs 1,80,000, and the fully delivered licence adds Rs 3,00,000. Cash received in advance does not itself determine revenue under AS 9.

  1. ARs 10,20,000
  2. BRs 5,10,000
  3. CRs 4,80,000Correct
  4. DRs 3,00,000

Explanation

Maintenance is a service recognised proportionately as performed: 7,20,000 x 3/12 = Rs 1,80,000. The licence is fully delivered with no remaining obligation, so Rs 3,00,000 is recognised. Total = 1,80,000 + 3,00,000 = Rs 4,80,000. Rs 10,20,000 wrongly recognises the advance receipt as revenue.

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