## Sale on Approval (Sale on Appro)

### Concept

Goods are sent to a customer, who has the option to accept or return them within a specified period. Title and risks do not transfer until acceptance.

### Revenue Recognition Rule

Revenue should not be recognised until:

1. The buyer formally accepts the goods, OR

2. The time period for rejection has lapsed without return

### Timeline:

```

Goods sent on appro → No revenue yet

Buyer accepts goods → Recognise revenue immediately

Rejection period lapses without return → Recognise revenue on lapse date

```

Worked example

### Example 1

Myntra sends goods to a customer on 01/04 with a 30-day return window.

01/04: No revenue recognised
10/04: Customer approves goods → Recognise revenue on 10/04

Alternately:

If customer says nothing and 30 days pass → Recognise revenue on 30/04 (period lapsed)

### Example 2

A customer receives trial software on 01/04 with 15-day approval period.

Customer explicitly rejects on 08/04 → No revenue recognised.
Customer says nothing by 15/04 → Revenue recognised on 15/04.

⚠️ Common exam mistakes

Booking revenue when goods are dispatched on approval basis — dispatch is not a sale.
Waiting for cash receipt to recognise revenue when the buyer has already formally accepted — acceptance triggers revenue recognition.
Not recognising revenue when the rejection period lapses — lapse of period equals deemed acceptance.

Reference:

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AS 9 – Sale on Approval Basis

Worked example

⚠️ Common exam mistakes