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CA Intermediate · Advanced Accounting · AS 18 Related Party Disclosures

Krishna Motors Ltd has a Director, Mr. Rao, whose wife is the sole proprietor of Rao Traders. During the year Krishna Motors sold goods to Rao Traders for Rs 12 lakh and the balance receivable at year-end was Rs 3 lakh. Which disclosure is required in Krishna Motors' statements under AS 18?

Krishna Motors must disclose the relationship, the nature of the transaction, the volume of Rs 12 lakh and the Rs 3 lakh outstanding balance. Rao Traders is owned by the spouse of a Director, a key management personnel, so it is a related party under AS 18.

  1. ANone, as a wife of a Director is not a relative under AS 18
  2. BOnly the Rs 12 lakh volume, since balances are never disclosed
  3. CDescription of relationship, nature of transaction, volume Rs 12 lakh and amount outstanding Rs 3 lakhCorrect
  4. DOnly the Rs 3 lakh outstanding balance

Explanation

A spouse is a relative, and an enterprise owned by a relative of key management personnel is a related party. AS 18 requires disclosure of the relationship, nature of transactions, volume (amount or proportion) and amounts outstanding. Hence both Rs 12 lakh and Rs 3 lakh are disclosed.

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