Case: Revenue of ₹6,00,000 was correctly recognised by Mohan Spices Ltd on a sale in January. In March, the customer faced severe financial difficulties and collection became uncertain. Under AS 9, the company should:

Correct answer: B) Retain the revenue and make a separate provision for the uncertainty of collection

Explanation

AS 9 states that where an uncertainty about collectability arises subsequent to the time of sale, it is more appropriate to make a separate provision to reflect the uncertainty rather than to adjust the amount of revenue originally recorded. Revenue is postponed only when the uncertainty exists at the time of sale.