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CA Intermediate · Advanced Accounting · AS 9 Revenue Recognition

Sundaram Finance Co. lends ₹10,00,000 to a borrower on 1 October 2025 at 12% p.a. simple interest, with interest and principal payable on 30 September 2027. The accounting year ends 31 March. Under AS 9, interest revenue to be recognised for the year ended 31 March 2026 is:

Interest revenue is ₹60,000. AS 9 requires interest to be recognised on a time proportion basis on the amount outstanding at the agreed rate, so six months at 12% on ₹10,00,000 gives ₹60,000, irrespective of when the cash is received.

  1. A₹1,20,000
  2. B₹2,40,000
  3. C₹60,000Correct
  4. DNil, as interest is not yet received

Explanation

AS 9 requires interest to be recognised on a time proportion basis, taking into account the amount outstanding and the rate applicable. Period from 1 October 2025 to 31 March 2026 is 6 months. Interest = 10,00,000 × 12% × 6/12 = ₹60,000. Option A is a full year; option D wrongly uses cash basis.

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