Skip to content

CA Intermediate · Advanced Accounting · AS 9 Revenue Recognition

Kaveri Finance Ltd. lent Rs 10,00,000 to a borrower on 1 October 20X1 at 12% p.a. simple interest, with interest and principal payable together at the end of 2 years. The company's year ends on 31 March. As per AS 9, how much interest revenue should be recognised for the year ended 31 March 20X2?

Interest revenue of Rs 60,000 should be recognised. AS 9 requires interest to be recognised on a time proportion basis on the outstanding principal at the applicable rate, and six months at 12% on Rs 10,00,000 gives Rs 60,000, regardless of when cash is received.

  1. ARs 1,20,000
  2. BRs 60,000Correct
  3. CRs 2,40,000
  4. DNil, because no interest has been received

Explanation

Interest accrues on a time basis on the principal outstanding at the rate applicable. From 1 October to 31 March is 6 months: 10,00,000 x 12% x 6/12 = Rs 60,000. Rs 1,20,000 is a full-year figure, ignoring the period. Nil would apply only if ultimate collection were uncertain, which is not stated.

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