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CA Intermediate · Advanced Accounting · AS 9 Revenue Recognition

Gupta Industries Ltd sells machines to Vikram Dealers on 1 March 2025 for Rs 12,00,000 (cost Rs 9,00,000). The goods remain in Gupta's warehouse at the buyer's request, ownership is transferred, the goods are identified, ready for delivery, and the buyer has accepted the invoice. Separately, it sold on 25 March 2025 a machine for Rs 4,00,000 (cost Rs 3,00,000) on a consignment basis to Lal Agencies, which has sold nothing by 31 March. What total revenue should Gupta recognise for FY 2024-25?

Revenue of Rs 12,00,000 should be recognised. The machine kept in the warehouse at the buyer's request has had ownership transferred, so the sale counts. The consignment machine still belongs to Gupta until Lal Agencies sells it, so its Rs 4,00,000 is not revenue yet.

  1. ARs 16,00,000
  2. BRs 12,00,000Correct
  3. CRs 4,00,000
  4. DNil

Explanation

For the first sale, property has passed to the buyer, goods are ready and identified, and the buyer takes delivery later, so revenue of Rs 12,00,000 is recognised (bill-and-hold with transfer of ownership). The consignment goods remain the consignor's, with risks and rewards retained until the consignee sells, so no revenue. Total Rs 12,00,000; option A wrongly includes the consignment.

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