Big Deal Ltd. is a marketing company having its departmental stores in 'A' class city of India. The company sells the diversified products. For the…

CA Final · Financial Reporting · MTP · January 2026
Big Deal Ltd. is a marketing company having its departmental stores in 'A' class city of India. The company sells the diversified products. For the purpose of increasing sales and attract customers, the company during the financial year 20X3-20X4, has adopted the following policy: (i) For every purchase of 400the customer is awarded with 6 points. (ii) Each point is redeemable on any future purchases of company's same departmental store situated in any of 'A' class city within 3 years i.e. up to 31st March, 20X6 (iii) Value of each award point is 0.60 During the financial year 20X3-20X4, the Big Deal Ltd: (i) Assessed that the sales of the company during the year 20X3-20X4 is 150 lakhs. (ii) Awarded 2,25,000 points to various customers during the year. (iii) Estimated that out of the awarded points, 54,000 points will remain unredeemed as at 31st March, 20X4 which shall be eligible for redemption till 31st March, 20X6 and; (iv) Expects only 75% points will be redeemed in the future. As an accountant of the company, you are required to suggest the accounting treatment (Consolidated Journal Entries) in the following case: How should the sales and redemption transactions be recognized and recorded as independent transactions in the financial year 20X3-20X4 as per Ind AS 115?

Suggested Answer and Working Notes:

Points earned on 1,50,00,000 @ 6 points on every - 400 = [(1,50,00,000/400) x 6] = 2,25,000 points. Out of 2,25,000 points, it is estimated that 54,000 points will remain unredeemed in the current year. Further, it is expected that 75% of the unredeemed points will be redeemed in the future. Accordingly, value of points will be computed as follows: Value of points redeemed in the current year = (2,25,000-54,000) points x 0.6 each point = 1,02,600 Value of points estimated to be redeemed in future = 54,000 points x 75% x 0.6 each point = 24,300 Total value of loyalty points = 1,02,600 +24,300 = 1,26,900 Revenue recognized for sale of goods = 1,48,74,165 [1,50,00,000 x (1,50,00,000 / 1,51,26,900)] Revenue for points = 1,25,835 [1,26,900 x (1,50,00,000 / 1,51,26,900)] Journal Entry for the year 20X3-20X4 Particulars ₹ Bank A/c Dr. 1,50,00,000 To Sales A/c 1,48,74,165 To Liability under Customer Loyalty programme 1,25,835 (On sale of Goods) Liability under Customer Loyalty programme Dr. 1,01,739 To Sales A/c 1,01,739 (On redemption of (2,25,000 – 54,000) points) Revenue for points to be recognized Undiscounted points estimated to be recognized next year = 54,000 x 75% = 40,500 points Total points to be redeemed within 3 years = [(2,25,000 – 54,000) + 40,500] = 2,11,500 points Revenue to be recognised with respect to discounted points = 1,25,835 x (1,71,000/2,11,500) = 1,01,739

Topics: Ind AS 115

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