Installment Sales
Revenue recognition after delivery--Installment Sales
- Recognizes income in the period it is collected rather than the period of sale; defers revenue recognition.
- Emphasizes the collection of the sales, not the realization of the sale as the time of revenue recognition.
- Periodic payments made over a lengthy time interval.
- Matching followed and gross profit deferred.
- Use considered when there is significant uncertainty about:
- The collectibility of the sale.
- Title does not pass until the
payments are made.
- High percent gross profit, high
returns are present.