Skip to content

CA Intermediate · Advanced Accounting · AS 9 Revenue Recognition

Gupta Traders sold goods on 28 March 2025 for Rs 6,00,000 (cost Rs 4,50,000) to Mehta Stores on the term that Mehta may return the goods within 30 days if not sold, and the seller cannot reasonably estimate returns. The year ends 31 March 2025. Mehta has taken delivery. Considering AS 9, what is the appropriate treatment in the books of Gupta Traders for the year ended 31 March 2025?

No revenue should be recognised in this year. The buyer can return the goods and the seller cannot reasonably estimate returns, so a significant uncertainty remains about the sale. AS 9 postpones recognition until the return period lapses or the uncertainty is removed.

  1. ARecognise revenue Rs 6,00,000 in full because delivery has been made
  2. BRecognise revenue only Rs 1,50,000, being the profit
  3. CRecognise no revenue until the return period lapses or the uncertainty is resolvedCorrect
  4. DRecognise Rs 3,00,000 as 50 percent of the sale

Explanation

Under AS 9, revenue from sale is recognised when significant risks and rewards of ownership are transferred and no significant uncertainty exists about consideration. Where the buyer has a right of return and the seller cannot estimate returns reliably, recognition is postponed until the right of return expires or the uncertainty is resolved. Recognising full revenue ignores this uncertainty.

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