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CA Intermediate · Advanced Accounting · AS 9 Revenue Recognition

Rajan Finance Ltd lent ₹10,00,000 to a customer on 1 October 2025 at 12% p.a. simple interest. Interest is payable on the principal along with the principal on 30 September 2027, and there is no uncertainty about collection. What interest revenue should Rajan Finance recognise for the year ended 31 March 2026?

Rajan Finance should recognise ₹60,000. AS 9 requires interest to be accrued on a time proportion basis on the amount outstanding at the applicable rate, regardless of when it is paid. Six months at 12% on ₹10,00,000 gives ₹60,000 for the year ended 31 March 2026.

  1. ANil, because interest is receivable only in 2027
  2. B₹1,20,000
  3. C₹60,000Correct
  4. D₹30,000

Explanation

AS 9 requires interest to be recognised on a time proportion basis, taking into account the amount outstanding and the rate applicable. Period 1 Oct 2025 to 31 Mar 2026 is 6 months. Interest = 10,00,000 × 12% × 6/12 = ₹60,000. Nil ignores accrual, and ₹1,20,000 is a full-year figure.

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