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CA Intermediate · Advanced Accounting · AS 9 Revenue Recognition

Rao Cinemas Ltd. entered into an agreement with Vistara Films for exhibiting a film. It pays a royalty of 20% of box office collections. Collections for the year ended 31 March 2025 were Rs 50,00,000. In addition, the company sold in-house advertising slots for Rs 4,00,000, of which slots worth Rs 1,00,000 would be shown only in the next year. Under AS 9, what is the total revenue of Rao Cinemas Ltd. for the year ended 31 March 2025? (Treat the royalty as an expense and box office collections as its revenue.)

Total revenue is Rs 53,00,000. Box office collections of Rs 50,00,000 are revenue, with the royalty treated as an expense rather than deducted. Advertising income is recognised only when the advertisement is exhibited, so Rs 3,00,000 counts and Rs 1,00,000 is deferred to next year.

  1. ARs 54,00,000
  2. BRs 44,00,000
  3. CRs 53,00,000Correct
  4. DRs 43,00,000

Explanation

Box office collections of Rs 50,00,000 are the company's revenue; the 20% royalty (Rs 10,00,000) is an expense and is not netted. Advertising revenue is recognised when the advertisement is shown, so only Rs 3,00,000 is recognised and Rs 1,00,000 is deferred. Total = 50,00,000 + 3,00,000 = Rs 53,00,000. Rs 54,00,000 ignores the deferral.

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