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CA Intermediate · Advanced Accounting · AS 9 Revenue Recognition

Meera Finance Ltd. lent ₹10,00,000 to a customer on 1 July 2024 at 12% per annum simple interest, interest payable annually on 30 June. Under AS 9, how much interest revenue should Meera recognise for the year ended 31 March 2025, assuming ultimate collection is reasonably certain?

Meera should recognise ₹90,000. Interest accrues on a time-proportion basis, so the nine months from 1 July 2024 to 31 March 2025 at 12% on ₹10,00,000 give ₹90,000, regardless of the annual payment date.

  1. A₹90,000Correct
  2. B₹1,20,000
  3. C₹60,000
  4. D₹1,00,000

Explanation

Interest is recognised on a time-proportion basis on the amount outstanding at the rate applicable. From 1 July 2024 to 31 March 2025 is 9 months: 10,00,000 × 12% × 9/12 = ₹90,000. Recognising ₹1,20,000 would wrongly use a full year, ignoring that interest is accrued rather than awaiting the due date.

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