Tonk Tanners is engaged in manufacturing of leather shoes. They provide you the following information for the year 2024-25: (i) On 31st December,…

(i) Shoes sent to Mohan Shoes (consignee) for consignment sale In case goods are sent for consignment sale, revenue is recognized when significant risks of ownership have passed from seller to the buyer. In the given case, Mohan Shoes is the consignee i.e. an agent of Tonk Tanners and not the buyer. Therefore, the risk and reward is considered to vest with Tonk Tanners only till the time the sale is made to the third party by Mohan Shoes; although the goods are held by Mohan Shoes. Hence, in the year 2024-25, the sale will be recognized for the amount of goods sold by Mohan Shoes to the third party i.e. for 3,20,000 x 75% = 2,40,000. (ii) Sale/repurchase agreements i.e. where seller concurrently agrees to repurchase the same goods at a later date For such transactions that are in substance a financing agreement, the resulting cash inflow is not revenue and should not be recognised as revenue in the year 2024-25. Hence, sale of 4,50,000 to Shani Shoes should not be recognized as revenue. (iii) Delivery is delayed at buyer's request On 21st March, 2025, if Shoe Shine takes title and accepts billing for the goods then it is implied that the sale is complete and all the risk and rewards of ownership has been transferred to the buyer. In case no significant uncertainty exists regarding the amount of consideration for sale, revenue shall be recognized in the year 2024-25 irrespective of the fact that the delivery is delayed on the request of Shoe Shine.