## Revenue from Other Sources: Interest, Royalties, and Dividends

### Interest

Recognised on time proportion basis
Accrued proportionately over the period for which funds are used
Example: If ₹1,00,000 is invested at 12% p.a., interest of ₹1,000 is recognised each month

### Royalties

Recognised on accrual basis in accordance with the terms of the relevant agreement
Recognised as the underlying asset is used

### Dividends

Recognised when the owner's right to receive the dividend is established
For listed companies: right is established when the dividend is declared (not when proposed)

> Critical distinction: A proposed dividend creates no legal obligation and thus no right to receive — revenue is recognised only on declaration.

### Timeline for Dividends

```

Board proposes dividend → No revenue yet (proposal ≠ right)

Shareholders declare at AGM → RIGHT ESTABLISHED → Book dividend income

Actual payment received → Cash received

```

Worked example

### Example 1

A company holds shares in Reliance Ltd.

15/01: Reliance board proposes dividend of ₹5/share → Do NOT book income
15/06: Dividend declared at AGM → Book dividend income on 15/06
30/06: Money received → Dr. Bank, Cr. Dividend Receivable

### Example 2

A company earns royalty of ₹10,000 per month under an agreement. For the quarter April–June:

Recognise ₹30,000 as royalty income on accrual basis regardless of when cash is received.

⚠️ Common exam mistakes

Booking dividend income when dividend is proposed by the board — income arises only when declared by shareholders.
Recognising interest on cash basis instead of time proportion basis.
Confusing royalties with service revenue — royalties follow the agreement terms, not completion of service.

Bare-Act text Para 14 – Other Sources of Revenue · AS 9 – Revenue Recognition (ICAI) · click to expand

Revenue arising from the use by others of enterprise resources yielding interest, royalties and dividends should only be recognised when no significant uncertainty as to measurability or collectability exists. These revenues are recognised on the following bases: (i) Interest: on a time proportion basis taking into account the amount outstanding and the rate applicable. (ii) Royalties: on an accrual basis in accordance with the terms of the relevant agreement. (iii) Dividends from investments in shares: when the owner's right to receive payment is established.

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AS 9 – Revenue from Interest, Royalties and Dividends

Worked example

⚠️ Common exam mistakes