A Ltd. is a company which is in the business of manufacturing engineering machines and providing after sales services. The company entered into a…

(a) As per para 27 of Ind AS 115, a good or service that is promised to a customer is distinct if both of the following criteria are met: (a) the customer can benefit from the good or service either on its own or together with other resources that are readily available to them. A readily available resource is a good or service that is sold separately (by the entity or another entity) or that the customer has already obtained from the entity or from other transactions or events; and (b) the entity's promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. Factors that indicate that two or more promises to transfer goods or services to a customer are separately identifiable include, but are not limited to, the following: (a) significant integration services are not provided (i.e. the entity is not using the goods or services as inputs to produce or deliver the combined output called for in the contract) (b) the goods or services does not significantly modify or customize other promised goods or services in the contract. (c) the goods or services are not highly inter-dependent or highly interrelated with other promised goods or services in the contract Accordingly, on 1st April, 20X1, entity A entered into a single transaction with three identifiable separate components: 1. Sale of a good (i.e. engineering machine); 2. Rendering of services (i.e. engineering machine maintenance services on 30th September, 20X1 and 1st April, 20X2); and 3. Providing finance (i.e. sale of engineering machine and rendering of services on extended period credit). (ii) Calculation and allocation of revenue to each component of the transaction Date Opening balance Finance income Goods Services Payment received Closing balance 1 st April, 20X1 - - 2,51,927 - - 2,51,927 30 th September, 20X1 2,51,927 12,596 (Note 1) - 45,000 - 3,09,523 31 st March 20X2 3,09,523 15,477 (Note 2) - 75,000 (4,00,000) - 1 st April, 20X2 3,25,000 - - - - 3,25,000 Notes: 1. Calculation of finance income as on 30th September, 20X1 = 5% x 2,51,927 = 12,596 2. Calculation of finance income as on 31st March, 20X2 = 5% x 3,09,523 = 15,477 (iii) Journal Entries Date Particulars Dr. (₹) Cr. (₹) 1 st April, 20X1 Mr. Anik Dr. 2,51,927 To Revenue - sale of goods (Profit or loss A/c) 2,51,927 (Being revenue recognised from the sale of the machine on credit) Cost of goods sold (Profit or loss) Dr. 1,60,000 To Inventories 1,60,000 (Being cost of goods sold recognised) 30 th September 20X1 Mr. Anik Dr. 12,596 To Finance Income (Profit or loss) 12,596 (Being finance income recognised) Mr. Anik Dr. 45,000 To Revenue- rendering of services (Profit or loss) 45,000 (Being revenue from the rendering of maintenance services recognised) Cost of services (Profit or loss) Dr. 30,000 To Cash/Bank or payables 30,000 (Being the cost of performing maintenance services recognised) 31 st March 20X2 Mr. Anik Dr. 15,477 To Finance Income (Profit or loss) 15,477 (Being finance income recognised) 1 st April, 20X2 Mr. Anik Dr. 75,000 To Revenue - rendering of services 75,000 (Profit or loss) (Being revenue from the rendering of maintenance services recognised) Cost of services (Profit or loss) Dr. 50,000 To Cash/Bank or payables 50,000 (Being the cost of performing maintenance services recognised) Cash/Bank Dr. 4,00,000 To Mr. Anik 4,00,000 (Being the receipt of cash from the customer recognised)