Page 26 - 19. COMPILER QB - INDAS 115

Average unit price = Probability weighted sales value
Probability weighted sales volume
= 20,53,500 / 25,950 = Rs.79.13 per unit

Revenue is recognised at ₨.79.13 for each unit sold. First 10,000 units sold will be booked at ₨.90 per unit
and liability is accrued for the difference price of ₨.10.87 per unit (₨.90 – ₨.79.13), which will be reversed
upon subsequent sales of 15,950 units (as the question states that ABC Ltd. achieved the same number of
units of sales to the customer during the year as initially estimated under the expected value method for the

financial year 2019-2020). For, subsequent sale of 15,950 units, contract liability is accrued at ₨.0.87 (80 –
79.13) per unit and revenue will be deferred.

(ii) Determination of how revenue is to be recognised in the books of ABC Ltd. as per most likely
method

Note: It is assumed that the sales volume of 28,000 units given under the expected value method, with
highest probability is the sales estimated under the most likely method too.

Transaction price will be:
28,000 units x ₨.80 per unit = ₨.22,40,000
Average unit price applicable = ₨. 80

First 10,000 units sold will be booked at ₨.90 per unit and liability of ₨.1,00,000 is accrued for the difference
price of ₨.10 per unit (₨.90 – ₨.80), which will be reversed upon subsequent sales of 18,000 units (as
question states that ABC Ltd. achieved the same number of units of sales to the customer during the year as
initially estimated under the most likely method for the financial year 2019-2020).

Note: Alternatively, the question may be solved based on 25,950 units (as calculated under expected value
method assuming that the targets were met) as follows:
Transaction price will be:
25,950 units x ₨.80 per unit = ₨.20,76,000
Average unit price applicable = ₨. 80.

First 10,000 units sold will be booked at ₨.90 per unit and liability is accrued for the difference price of ₨.10
per unit (₨.90 – ₨.80), which will be reversed upon subsequent sales of 15,950 units.

iii. Journal Entries in the books of ABC Ltd.

(when revenue is accounted for as per expected value method for financial year 2019-2020)

Rs Rs
1. Bank A/c (10,000 x ₨ 90) Dr. 9,00,000
To Revenue A/c (10,000 x ₨ 79.13) 7,91,300

To Liability (10,000 x ₨ 10.87) 1,08,700
(Revenue recognised on sale of first 10,000 units)
2. Bank A/c [(25,950 x ₨ 80)- 9,00,000] Dr. 11,76,000
Liability Dr. 86,124

To Revenue A/c (15,950 x ₨ 79.13) 12,62,124
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