Enforcement Officer / Accounts Officer (EO/AO) 2017 recruitment test. Transcribed from the Commission's own booklet (series A, GRS-A-TNS); answer as per the official UPSC final answer key. This question is in Part B. Answer last reviewed 24 August 2026.

In case of gold, revenue is recognized in the accounting period in which the gold is

(a)delivered
(b)sold
(c)mined
(d)identified to be mined

Answer

Why

Correct — C, (c) mined. Gold is the standard textbook exception to the rule that revenue waits for a sale, and the reason it is an exception is that for gold the critical event in the earning process is production, not the finding of a buyer.

Start with the ordinary rule. Accounting Standard 9, Revenue Recognition, states in paragraph 6.1 that the key criterion for revenue from a sale of goods is that the seller has transferred the property in the goods to the buyer for a consideration, or that all the significant risks and rewards of ownership have passed; paragraph 11 adds the second condition, that no significant uncertainty exists about the amount of the consideration that will be derived. For almost everything a business sells, both conditions are satisfied only at the moment of sale, because until a buyer is found there is neither a price nor a certainty of realisation.

Gold breaks that pattern on both counts. It is homogeneous, it has a continuously quoted world price, and the market for it is deep enough that a producer who has extracted it faces effectively no risk of being unable to sell. The amount realisable is therefore known before any buyer is identified, and the act of selling adds nothing material to the earning process — all the effort, cost and risk lay in getting the metal out of the ground. Once it is mined, performance is substantially complete.

AS 9 says so directly, in paragraph 6.2: 'At certain stages in specific industries, such as when agricultural crops have been harvested or mineral ores have been extracted, performance may be substantially complete prior to the execution of the transaction generating revenue. In such cases when sale is assured under a forward contract or a government guarantee or where market exists and there is a negligible risk of failure to sell, the goods involved are often valued at net realisable value.' The standard adds a careful qualification of its own — that such amounts, 'while not revenue as defined in this Statement, are sometimes recognised in the statement of profit and loss and appropriately described'. So AS 9 recognises the practice and reserves its own definition of revenue for the sale-based case. The accounting period in which the amount enters the statement of profit and loss is nonetheless the period of extraction, which is what the stem asks about.

This basis is called the completion-of-production basis, and its scope is exactly as narrow as its justification: an assured market, a determinable price and negligible risk of failure to sell. It applies to gold and other precious metals and to certain agricultural produce, and to almost nothing else.

Why the others are wrong

(a)delivered — Delivery is a recognition trigger in the ordinary case, because delivery is usually when the property in the goods, or the significant risks and rewards of ownership, pass to the buyer. AS 9 even provides for the reverse situation, where delivery is delayed at the buyer's request and the buyer takes title and accepts billing — revenue is recognised there despite no physical delivery, so long as the goods are on hand, identified and ready. But for gold the recognition point sits earlier than either sale or delivery. Choosing delivery is the answer of a candidate who has correctly learnt the general rule and not noticed that the stem has named a commodity that is governed by the exception.
(b)sold — This is the general rule and it is the most attractive wrong option on the list — for nearly every other product it would be right. What makes it wrong here is that the stem does not ask about goods in general; it opens 'In case of gold', and the only reason to single out gold is that gold is not governed by the general rule. A useful reading habit follows: when a stem names a particular commodity, industry or instrument, the question is almost always about the exception that applies to it, and answering with the general principle is answering a question that was not asked.
(d)identified to be mined — Ore identified as being present, and intended to be mined, is a reserve estimate. No production has taken place, no performance is complete, and there is no output that could be valued at net realisable value. Recognising an amount at that point would be recognising an unrealised gain on the change in value of an asset the enterprise still holds — and AS 9 expressly puts such items outside the definition of revenue, listing among the exclusions 'unrealised holding gains resulting from the change in value of current assets' and gains from merely holding non-current assets. The option is placed here to see whether a candidate who understands that recognition can move earlier than sale also understands how much earlier it can move: to completion of production, and no further.

Concept

Revenue recognition asks when, not how much. The default in Indian accounting is the sale basis: AS 9 recognises revenue from goods when the property in the goods, or all the significant risks and rewards of ownership, have passed to the buyer and no significant uncertainty remains about the consideration; revenue from services is recognised under the proportionate completion method or the completed service contract method; interest accrues on a time-proportion basis, royalties on the terms of the agreement, and dividends when the right to receive payment is established. Around that default sit two recognised departures. The first moves recognition earlier, to the completion of production, in the narrow circumstances of AS 9 paragraph 6.2 — an assured market under a forward contract or a government guarantee, or a market with negligible risk of failure to sell, as with gold and other precious metals and certain agricultural produce. The second moves it later, postponing recognition where collection is not reasonably expected, which AS 9 paragraph 10 requires and paragraph 14 requires to be disclosed. The whole subject was re-founded under the converged standards: Ind AS 115 recognises revenue when control of a good or service transfers to the customer, through a five-step model of identifying the contract, the performance obligations, the transaction price, its allocation, and satisfaction of the obligation. A candidate should be able to state both frameworks and say which one a question is set in — items of this vintage are set in the AS framework.

The accountancy run of this paper opens here, and it opens with an exception rather than a rule, which tells a candidate what kind of accountancy the Commission tests. It is not enough to know that revenue is recognised on sale; the questions live at the boundaries, where a named commodity, a named expense or a named transaction is governed by a special provision. For an Accounts Officer the reason is practical: the general rule is applied by anyone, and the officer's value lies in recognising the case that is not general. The reading habit that follows is to treat every proper noun in a stem as a signal — 'in case of gold' is doing work, and the work it is doing is pointing at paragraph 6.2.

Key facts

AS 9, Revenue Recognition, was issued by the Institute of Chartered Accountants of India in 1985.
Paragraph 6.1: the key criterion for a sale of goods is transfer of the property in the goods for a consideration, or of all significant risks and rewards of ownership.
Paragraph 11 adds that no significant uncertainty may exist about the amount of consideration that will be derived.
Paragraph 6.2 provides the completion-of-production case: where crops have been harvested or mineral ores extracted, performance may be substantially complete before the transaction that generates revenue.
That treatment applies where sale is assured under a forward contract or a government guarantee, or where a market exists with negligible risk of failure to sell; the goods are then often valued at net realisable value.
AS 9 notes that such amounts, while not revenue as defined in the Statement, are sometimes recognised in the statement of profit and loss and appropriately described.
Gold qualifies because it is homogeneous, continuously priced in a deep market, and carries negligible risk of failure to sell.
AS 9 excludes from revenue any unrealised holding gain arising from a change in the value of an asset still held.
Where collection is not reasonably expected, AS 9 requires recognition to be postponed, and the circumstances to be disclosed.
Under the converged framework, Ind AS 115 recognises revenue when control of the good or service transfers to the customer, through a five-step model.

The general rule waits for a sale; gold is the standard exception, and it moves exactly one step earlier

(c) Mined — completion of production→For gold the critical event in the earning process is production, not the finding of a buyer. It is homogeneous, continuously priced in a deep market, and a producer who has extracted it faces effectively no risk of being unable to sell — so all the effort, cost and risk lay in getting the metal out of the ground.

What AS 9 paragraph 6.2 says→Where agricultural crops have been harvested or mineral ores extracted, performance may be substantially complete before the transaction that generates revenue; where sale is assured under a forward contract or a government guarantee, or a market exists with negligible risk of failure to sell, the goods are often valued at net realisable value.

(b) Sold — the general rule→The most attractive miss, and right for nearly every other product. AS 9 paragraph 6.1 requires transfer of the property in the goods, or of all significant risks and rewards of ownership, and paragraph 11 adds that no significant uncertainty may remain about the consideration. But the stem opens 'In case of gold', and the only reason to single out a commodity is that it is governed by the exception.

(a) Delivered→Usually the moment the property, or the significant risks and rewards, pass to the buyer — and AS 9 even provides for delivery delayed at the buyer's request. But for gold the recognition point sits earlier than either sale or delivery. This is the answer of a candidate who has learnt the general rule correctly and not noticed the named commodity.

(d) Identified to be mined — one step too far→Ore identified as present and intended to be mined is a reserve estimate. No production has taken place and nothing exists that could be valued at net realisable value; recognising an amount there would be recognising an unrealised holding gain on an asset still held, which AS 9 expressly excludes from revenue.

How narrow the exception is→The completion-of-production basis requires an assured market, a determinable price and negligible risk of failure to sell. It applies to gold and other precious metals and to certain agricultural produce, and to almost nothing else.

Study next

AS 9 in full — sale of goods, rendering of services, interest, royalties and dividends, and the effect of uncertaintiesThe illustrations in the appendix to AS 9 — delayed delivery, sale on approval, guaranteed sales, consignment sales and instalment salesInd AS 115 and its five-step model, and how it differs from AS 9The accrual concept and the realisation concept, and how they combine to fix the timing of revenueAS 2 on inventory valuation, and when inventory may be carried at net realisable value

Common traps

Applying the general sale basis to a stem that has deliberately named a special commodity.
Confusing delivery with sale; both are wrong here, but they are wrong for different reasons.
Extending the completion-of-production basis to any manufacturer; it requires an assured market and negligible risk of failure to sell.
Treating the identification of a mineral reserve as production, which would recognise an unrealised holding gain.
Answering an AS-framework question with an Ind AS 115 control-transfer analysis, or the reverse.

EPFO accountancy items are short and precise, and they cluster on the boundaries of a standard: which basis applies to a named commodity, what is included in a defined cost, how a named expense is classified. The efficient preparation is to hold each standard as its rule plus its exceptions, because the rule alone will not distinguish between two options that both look reasonable. AS 9, AS 2 and the capital-versus-revenue distinction between them account for a large share of the accountancy questions across these papers.

Related PYQs

EPFO_APFC_2023_Q42

According to the Accounting Standard–1, which of the following are the fundamental accounting assumptions?

(a) Going Concern, Consistency, Accrual
(b) Going Concern, Money Measurement, Conservatism
(c) Going Concern, Consistency, Conservatism
(d) Going Concern, Accounting Period, Accrual

Answer(a) Going Concern, Consistency, Accrual

The assumptions underneath this rule, asked on the 2023 APFC paper — the fundamental accounting assumptions of AS 1, of which accrual is the one that puts revenue in the period it is earned.

EPFO_EOAO_2023_Q76

Which of the following is included in the ‘Cost of Inventory’ according to Accounting Standard-2 (Inventory Valuation) :

(a) Administrative overheads that do not contribute to bringing the inventories to their present location and condition
(b) Storage costs which are necessary in the production process prior to a further production stage
(c) Selling and distribution costs
(d) Duties and taxes paid on purchases, subsequently recoverable by the enterprise from the Tax Authorities

Answer(b) Storage costs which are necessary in the production process prior to a further production stage

The neighbouring standard on the 2023 EO/AO paper — what AS 2 includes in, and excludes from, the cost of inventory.

Practice

practice — not a real PYQ
Under AS 9, revenue from the sale of goods is recognised when
- (a)the customer's order is received and accepted
- (b)the seller has transferred the property in the goods, or all significant risks and rewards of ownership, and no significant uncertainty exists about the consideration
- (c)the cash is actually received from the customer
- (d)the goods are manufactured and taken into stock
Answer(b) the seller has transferred the property in the goods, or all significant risks and rewards of ownership, and no significant uncertainty exists about the consideration
practice — not a real PYQ
Recognising an amount at the completion of production rather than on sale is appropriate where
- (a)the goods are perishable and must be sold quickly
- (b)sale is assured under a forward contract or a government guarantee, or a market exists with a negligible risk of failure to sell
- (c)the buyer has been given an unlimited right of return
- (d)the goods have been despatched to an agent on consignment
Answer(b) sale is assured under a forward contract or a government guarantee, or a market exists with a negligible risk of failure to sell

Why