The timing of recognition of revenue in the book of accounts has become a contentious issue as companies differ in interpreting the Accounting Standard and recognize revenue accordingly. In certain practical situations, this normally results in conflict of views between the companies and auditors. An attempt is made in this article to clear any doubts with regard to the above by explaining the provisions of Sale of Goods Act, 1930, and the Accounting Standard (AS 9) issued by The Institute of Chartered Accountants of India.

Accounting Standard (AS) 9 on revenue recognition issued by the Council of the Institute of Chartered Accountants of India deals with bases for recognition of revenue in the statement of profit and loss of an enterprise arising in the course of three ordinary activities, viz., the sale of goods, the rendering of services, and the use by others of enterprise resources yielding interest, royalties and dividends. The present discussion is concerned with, and limited to, the first activity, i.e., the sale of goods.

The actual standard comprises paragraphs 10-14 of the statement issued and should be read in the context of paragraphs 1-9 of this statement and the `Preface to the Statements of Accounting Standards.' The Preface to the Statements of Accounting Standards says that the standard must be in conformity with the provisions of `applicable laws' in force. In the present context, the applicable law to fall back on is the `Sale of Goods Act, 1930'.