Asked by JOSHUA MILLER on May 10, 2024
Verified
The installment sales method of recognizing profit for accounting purposes is acceptable if collection of the sales price is not reasonably assured.
Installment Sales Method
The installment sales method is an accounting technique used to recognize revenue and expenses for sales made on credit, wherein income is recognized as installment payments are received.
Recognizing Profit
The process of formally acknowledging and recording income on the financial statements when it is earned, regardless of when the cash is received.
Reasonably Assured
A level of certainty in the ability to achieve a particular outcome, often used in the context of revenue recognition and lease agreements.
- Recognize the various techniques of revenue recognition applicable to different transactions, such as installment sales, franchise contracts, and bundled transactions.
Verified Answer
WC
Willie CollazoMay 16, 2024
Final Answer :
True
Explanation :
The installment sales method is used when collection of the sales price is not reasonably assured. It allows for recognition of profit over a period of time as payments are received from the customer, rather than recognizing the full profit at the time of sale. This method is acceptable under the generally accepted accounting principles (GAAP) in the United States.
Learning Objectives
- Recognize the various techniques of revenue recognition applicable to different transactions, such as installment sales, franchise contracts, and bundled transactions.