Skip to content

CA Intermediate · Advanced Accounting · AS 9 Revenue Recognition

Ganga Textiles Ltd. sold goods to Rohit Garments for Rs 20,00,000 on 10 March 2025 with a right to return within 30 days; past experience gives no reliable basis to estimate returns. Goods were delivered on 10 March. Separately, on 15 March Ganga sold goods of Rs 8,00,000 on a sale-or-approval basis where the buyer had not yet accepted them and the approval period was open at year end. The year-end is 31 March 2025. What total revenue should Ganga recognise for the year from these two transactions?

Ganga should recognise nil revenue. For the Rohit sale, returns cannot be reliably estimated and the 30-day period is still open, so significant risks have not passed. For the approval sale, the buyer has neither accepted nor let the approval period lapse. Both are recognised in later periods.

  1. ARs 28,00,000
  2. BRs 20,00,000
  3. CRs 8,00,000
  4. DNilCorrect

Explanation

Where the buyer has a right to return and the seller cannot reliably estimate returns, risks and rewards are not considered transferred, so revenue waits until the return period lapses (after 31 March) or acceptance. Sale on approval is recognised only on acceptance or lapse of the approval period, neither of which has occurred. So no revenue is recognised in the year. Rs 20,00,000 ignores the unquantifiable return right.

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