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Realisation concept.. (Accounts)

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This query is : Resolved

Author : Anonymous

( Author )
11 November 2011

An order is received in the month of April for a particular commodity. The sale price is realised in the month of June. The commodity is transferred in the month of May. Money will be deemed to have been realised in the month of May and not April to June.
.
Can anyone explain this concept to me.?


Siddhartha Bhardwaj

( Expert )
11 November 2011

This problem is covered by AS 9, Revenue Recognition.

As per AS 9 revenue (sale price) is to be recognised when the seller has transferred the property in goods to the buyer, i.e., the risks and rewards associated with the goods have been transferred to the buyer.

Therefore, in the query the ownership is transferred in May and therefore revenue will be recognised in the month of May.


Author : Anonymous

( Author )
11 November 2011

Can you explain it with an example, figures, so that it'll be easy to understand the concept.


Author : Anonymous

( Author )
11 November 2011

I mean it's A/cing treatment?


Siddhartha Bhardwaj

( Expert )
11 November 2011

Lets take your example.

Order received on 14th April, 2011 for supplying 50,000 units. total price Rs. 500 lakhs.

On 20th May, goods dispatched to buyer.

Payment received on 30th June.

Accounting Entries:

14th April - No entry

20th May

Buyer A/c Dr.
To Sales
(Revenue recognised)

30th June

Bank A/c Dr.
To Buyer
(Consideration realised)


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