Installment Sales
Installment sales are examples of revenue recognition for these types of transactions after delivery, which is a type of sale where payment is required within the period of installments over an extended period of time. It is used in retail trade where all types of equipment and furnishings for farm and household installment sale basis. Sometimes it is also used for industrial heavy equipment where the installation machine is paid for long periods.
Installment method emphasizes the collection of sales, this method recognizes profit in the billing period and not during the sale period. Basic accounting installment justified on the grounds that there is no longer a suitable basis for estimating the level that can be billed, revenue should not be recognized until collectibility of cash. To illustrate the installment sales method in accounting for merchandise sales, assume the following data represents the balance of installment sales.