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Journal Entries in the year 2017-18
Rs Rs
Bank A/c Dr. 50,00,00,000
To Sales A/c 49,50,49,505
To Liability under Customer Loyalty 49,50,495
programme A/c
(On sale of Goods)

Liability under Customer Loyalty Dr. 42,11,002
programme A/c
To Sales A/c 42,11,002
(On redemption of 82 lakhs points)

Revenue to be recognised with respect to discounted point = 49,50,495 x (82,00,000/96,40,000) = 42,11,002
(being proportionate revenue for 82,00,000 points redeemed in 17-18)
c) Revenue to be deferred with respect to undiscounted point in 2017-2018= 49,50,495 – 42,11,002 =

7,39,493

d) In 2018-2019, KK Ltd. would recognize revenue for discounting of 60% of outstanding points as follows:
Outstanding points = 18,00,000 x 60% = 10,80,000 points

Total points discounted till date = 82,00,000 + 10,80,000 = 92,80,000 points
Revenue to be recognized in the year 2018-2019 = [{49,50,495 x (92,80,000 / 96,40,000)} - 42,11,002] =
Rs 5,54,620.
Journal Entry in the year 2018-2019
Rs Rs
Liability under Customer Loyalty programme Dr. 5,54,620
To Sales A/c
(On redemption of further 10,80,000 points 5,54,620

The Liability under Customer Loyalty programme at the end of the year 2018-2019 will be Rs7,39,493 –
5,54,620 = 1,84,873.

e) In the year 2019-2020, the merchant will recognize the balance revenue of Rs1,84,873 irrespective of the

points redeemed as this is the last year for redeeming the points. Journal entry will be as follows:

Journal Entry in the year 2019-2020
Rs Rs
Liability under Customer Loyalty programme Dr. 1,84,873
To Sales A/c 1,84,873
(On redemption of further 10,80,000 points)

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