## Sale and Repurchase Agreements
### Concept
A transaction where Party A sells an asset to Party B but agrees to repurchase the same asset at a later date (usually at a higher price). This is economically a loan/financing arrangement, not a true sale.
### Accounting Treatment
- Do NOT recognise revenue from such a transaction
- Treat it as a secured borrowing: the asset remains on the seller's books, and the inflow is recorded as a loan
- The difference between sale price and repurchase price is recognised as interest expense over the period
### Journal Entries:
01/04 (Asset sold/cash received ₹10 lakhs):
```
Bank A/c Dr. 10 lakhs
To Loan Taken A/c 10 lakhs
```
31/12 (Interest accrual ₹1 lakh):
```
Interest Expense A/c Dr. 1 lakh
To Loan Taken A/c 1 lakh
```
31/12 (Repurchase — repay ₹11 lakhs):
```
Loan Taken A/c Dr. 11 lakhs
To Bank A/c 11 lakhs
```