Installment Sales Method
The installment sales method, is used to recognize revenue after the sale has occurred and when sales are stipulated under very extended cash collection terms. In general, when the risk of not being able to collect is reasonably high and when there is no reasonable basis for estimating the proportion of installment accounts, revenue recognition is deferred, and the installment sales method is used. The installment sales method are typically used to account for sales of consumer durables, retail land sales, and retirement property. Under the cost recovery method, another method to recognize income after the sale is made, no profit is recognized until all the costs are recovered.
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