Revenue from contracts: cash vs accrual

Abstract

Learning outcomes

The case provides an insight on the provisions of the IND AS 115 (largely converging with IFRS 15), financial impact of alternative accounting practices and dynamics of a revenue recognition decision. MBA students can use the knowledge derived from the case at their workplace when they encounter accounting of “revenue from a contract with customers”.

Case overview/synopsis

Saifudin Rehman, one of the promoter of Suprajeet Corporation (SUC) had been engaged in electrical installation contract business. The firm had been doing well in the field of small contracts and was having steady growth. People in the firm were also quite acquainted with the kind of contracts they were doing. However, Saifudin always wanted to get into a big contract business. For getting into big installation contracts, the corporation needed more working capital and needed to satisfy the criteria of having a high amount of turnover in the preceding year. The case will be looked into from the perspective of accounting procedure to see the possibility of increasing the revenue by changing the method of accounting in relation to revenue recognition. The case provided the opportunity to evaluate the benefits and the costs involved in changing the accounting method in SUC.

Complexity academic level

Commerce Graduates and MBA I.

Supplementary materials

Teaching notes are available for educators only.

Subject code

CSS 1: Accounting and Finance.

Citation

Mohanty, B.K. and Routray, S.K. (2020), "Revenue from contracts: cash vs accrual", , Vol. 10 No. 4. https://doi.org/10.1108/EEMCS-10-2019-0276