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Devi`s Dilemma – Uncertainty in Revenue Recognition

Devi`s Dilemma – Uncertainty in Revenue Recognition
Case Code: CLFIN023
Case Length: 2 Pages
Period: -
Pub Date: 2020
Teaching Note: Available
Price: Rs.100
Organization : Devi Fashions
Industry :Textiles & Apparel/
Countries : India
Subject: Finance
Devi`s Dilemma – Uncertainty in Revenue Recognition

Abstract

Devi, a young and enthusiastic fashion designer, started a boutique called Devi Fashions (DF) after graduating with a degree in fashion designing. Within a short span of time, DF became hugely popular among urban college students, working women, and premium segment customers, for its unique, customized, and fashionable contemporary as well as traditional wear.

Overwhelmed by the success of the business, Devi wanted to launch new models during the third quarter of the financial year 2019-20, based on the expected revenues for the quarter. However, she was in a dilemma about estimating the actual revenues.

The present case study can be used to discuss the criteria of uncertainty in revenue recognition process, and how it impacts revenue generation in accounting. The Accounting Standard-9 (Revenue Recognition) provides guidelines for the recognition of revenue when there is uncertainty in the revenue recognition process.

Issues

  • The effect of uncertainty on the revenue recognition process.
  • The treatment of revenue prior to the actual sale proceedings.
  • The treatment of revenue after the actual sale proceedings.

Introduction

Devi, the sole-owner of Devi Fashions, was happy looking at the success of her boutique. She sold clothes for three types of customers – college students, working women, and customized segment aimed at targeting premium segment customers. All three categories of business were generating sufficient revenues. In order to expand her business and offer new models, Devi was planning to look at the expected sales for the third quarter of the financial year 2019-20.

Keywords

"Accounting, Accounting principles, Accounting Concepts, Revenue Recognition, Accounting Standard-9, Terms of Revenue Recognition, Profit and loss account, balance sheet

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