CA Intermediate · Advanced Accounting · AS 9 Revenue Recognition

Kaveri Software Ltd. sold 500 licences of its accounting package to a distributor, Mehta Traders, on 28 March 2025 at Rs 2,000 each, delivering the licence keys that day. The distributor has the right to resell, and Kaveri has no further obligation. The sale is made on credit with payment due in 60 days. Under AS 9, how much revenue should Kaveri recognise for the year ended 31 March 2025?

Kaveri should recognise Rs 10,00,000 as revenue. Risks and rewards of ownership passed on delivery of the licence keys, Kaveri has no further obligation, and collection is reasonably certain, so the full 500 x Rs 2,000 is recognised in the year, regardless of the credit period.

ARs 10,00,000Correct
BRs 5,00,000
CNil, until cash is received
DRs 2,000 per licence only when Mehta resells

Explanation

Revenue from sale of goods is recognised when significant risks and rewards of ownership pass to the buyer and there is no significant uncertainty about collection. Here, keys were delivered and no obligations remain, so 500 x Rs 2,000 = Rs 10,00,000 is recognised. Waiting for resale or cash would be incorrect as ownership has already transferred.

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