Please Help: AS-9

Posted Date : 23-Jun-2011 , 12:13:49 pm | Posted By nidhi

a company having the retail business of branded garment. on an analysis of last year trends , it is found that company is having a sale return trend of 20-30% of its sale every year. It is booking all of its returns received till balance sheet date.
Problem is that whether company should reverse its sale on estimated basis of trend of 20-30%
sale return in its balance sheet on the basis of AS-9(Revenue Recognition). The company's view is that we can not estimate and recognise future sale returns likely to happen after balance sheet.
Now question is that:
1) Should we reverse the sale on the basis of estimate sale return trends of 20-30%?
2)Whether it will be proper accounting to prepare b/s on estimated basis?

Category : Accounts | Answers : 2 | Comments : 1 | Hits : 432

Answers

Answer By: PRIYANKA

Hello nidhi..In my opinion, u dont need to reverse sale but create a provision for margin not going to be recieved becoz of expected sales return in future based on past experience. Actual sales will be reversed at the time of actual sales return..But here several factors need consideration like what is the periosd of return normally granted ..is there an unlimited right to return or a limited right to return..so considering these factors appropriate provision can be made..n this is said in Appendix to AS-9 itself..so this ways b/s wud also be appropriate...

Answer By: CA VIKAS JAIN

priyanka is right, you should make appropriate provision for return on the basis of past experience.