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6. How the recognition of revenue from sales of medicine to Dee Limited will be done by HIL under AS 9 and what would be the treatment of unrealized amount for the year ended 31st March, 2024?

Options

ARevenue will be recognised for ` 50 Lakhs, subsequently unrealized amount ` 50 lakhs will be debited to bad debts A/c.
BRevenue will be recognised for ` 40 Lakhs, subsequently unrealized amount ` 40 lakhs will be debited to bad debts A/c. ADVANCED ACCOUNTING
CRevenue will be recognised for ` 50 Lakhs, subsequently unrealized amount ` 40 lakhs will be debited to bad debts A/c.
DRevenue will be recognised for ` 40 Lakhs, unrealised amount of ` 40 lakhs will be shown in Sundry Debtors list.
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Correct Answer

✅ Option C — Revenue will be recognised for ` 50 Lakhs, subsequently unrealized amount ` 40 lakhs will be debited to bad debts A/c.

All Options:

  • ARevenue will be recognised for ` 50 Lakhs, subsequently unrealized amount ` 50 lakhs will be debited to bad debts A/c.
  • BRevenue will be recognised for ` 40 Lakhs, subsequently unrealized amount ` 40 lakhs will be debited to bad debts A/c. ADVANCED ACCOUNTING
  • CRevenue will be recognised for ` 50 Lakhs, subsequently unrealized amount ` 40 lakhs will be debited to bad debts A/c. ✓
  • DRevenue will be recognised for ` 40 Lakhs, unrealised amount of ` 40 lakhs will be shown in Sundry Debtors list.

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Detailed Solution & Explanation

Under AS 9 (Revenue Recognition):
1. Revenue from sale of goods is recognized when significant risks and rewards of ownership are transferred and no significant uncertainty exists regarding the collection of the sales proceeds.
2. At the time of sale (1st Jan 2024), collection was certain, so full revenue of ‘ 50\displaystyle `\,50 lakhs is recognized.
3. Subsequently, the customer goes into liquidation in March 2024. The unpaid amount of ‘ 40\displaystyle `\,40 lakhs (after 20% payment of ‘ 10\displaystyle `\,10 lakhs) becomes uncollectible.
4. Under AS 9, this unrealized amount must be written off as bad debts (debited to the Profit & Loss A/c) rather than reversing the revenue.
Hence, **Option C** is the correct answer.

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