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CA Intermediate · Advanced Accounting · AS 18 Related Party Disclosures

Mehta Pharma Ltd sold goods costing Rs 6,00,000 to its subsidiary Mehta Labs Ltd for Rs 8,00,000 during the year. Mehta Labs Ltd paid Rs 5,00,000 and Rs 3,00,000 remained outstanding at year end. In the separate financial statements of Mehta Pharma Ltd, which disclosure is required under AS 18 for this transaction?

Mehta Pharma must disclose the sale of Rs 8,00,000 as the volume of the related party transaction and Rs 3,00,000 as the amount outstanding at year end. AS 18 requires the transaction volume at its transaction value, not cost or profit, along with balances outstanding.

  1. AOnly the Rs 2,00,000 profit on sale as the related party transaction
  2. BRs 6,00,000 as the volume of the transaction, being the cost of goods
  3. CRs 5,00,000 as the amount of the transaction, being the cash received
  4. DRs 8,00,000 as the volume of the transaction and Rs 3,00,000 as the amount outstanding at the year endCorrect

Explanation

AS 18 requires disclosure of the volume of transactions, either as an amount or an appropriate proportion, and of amounts outstanding at the balance sheet date. The volume is the sale value, Rs 8,00,000, not cost or cash received. The outstanding balance is 8,00,000 - 5,00,000 = Rs 3,00,000.

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