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29 yr old Orthopaedic Surgeon Grippo from Saint-Paul, spends time with interests including model railways, top property developers in singapore developers in singapore and dolls. Finished a cruise ship experience that included passing by Runic Stones and Church. Template:Accounting The installment sales method is one of several approaches used to recognize revenue under the US GAAP, specifically when revenue and expense are recognized at the time of cash collection rather than at the time of sale.[1] Under the US GAAP, it is the principal method of revenue recognition when the recognition occurs subsequently to the sale.[2]
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.[3] 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.[3] 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.[4]
Calculation under the installment sales method
The installment sales method recognizes revenue and income proportionately as cash is collected. The amount recognized in any period is thus based on two factors:[5]
Below is an example of calculation of installment sales for years 2009 and 2010.[5]
| 2009 | 2010 | |
|---|---|---|
| Installment sales | $1,200,000 | $1,300,000 |
| Cost on installment goods sold | $840,000 | $884,000 |
| Gross profit | $360,000 | $416,000 |
| Gross profit percentage | 30% | 32% |
| Cash collections | ||
| On 2009 installment sales | $300,000 | $600,000 |
| On 2010 installments sales | $340,000 |
- 2009 income from installment sales calculation:
The income recognized in 2009 equals cash collections in 2009 multiplied by the gross profit percentage in 2009 and is calculated as follows:
- $300,000×30% = $90,000
Such income is shown on the 2009 income statement as 2009 income from installment sales.
- 2009 Deferred Gross Profit calculation:
The deferred gross profit is an A/R contra-account and is the difference between gross profit and recognized income and is calculated as follows:
- $360,000 − $90,000 = $270,000
The deferred gross profit is thus deferred and recognized in income in subsequent periods, i.e. when the installment receivables are collected in cash.
- 2010 income from installment sales is $288,800 and calculated as follows:
| Total 2010 installment sales income | |
|---|---|
| Gross profit recognized | |
| Component relating to 2009 Sales | |
| Cash collections in 2010 from 2009 sales | $600,000 |
| Multiplied by year 2009 gross profit percentage | 30% |
| $180,000 | |
| Component relating to 2010 sales | |
| Cash collections in 2010 from 2010 sales | $340,000 |
| Multiplied by year 2010 gross profit percentage | 32% |
| $108,800 | |
| Total installment sales income recognized in 2010 | $288,800 |
A more comprehensive table would clearly show gross profit and deferred income recognized for each year: 2009 and 2010.
| 2009 | 2010 | |
|---|---|---|
| Installment sales | $1,200,000 | $1,300,000 |
| Cost of installment goods sold | ($840,000) | (884,000) |
| Gross profit | 360,000 | 416,000 |
| Less: Deferred gross profit on installment sales of current year | (270,000) | (307,200) |
| Gross profit recognized on current year's sales | 90,000 | 108,800 |
| Plus: Gross profit recognized on installment sales of prior years | 180,000 | |
| Total gross profit recognized in the year | $90,000 | $288,800 |
Installment sales and the related costs of good sold must be tracked by individual year in order to compute the gross profit percentage that applies to each year. Furthermore, the accounting system must correctly match the cash collections with the specific sales year so that the correct gross profit percentage be applied.[6]
On the balance sheet, "the accounts receivable - installment sales" is classified as current assets if it is due within 12 months of the balance sheet. Otherwise, it is classified as long term assets.[6]
Under the GAAP, the interest component of the priodic cash proceeds is computed separately. In fact, interest payments are not considered when the recognized gross profit is computed on installment sales. Certain procedures differentiate between principal and interest payments on customer receivables.[7]
Comparison to the cash and accrual method
Cash method – The cash method requires that an amount be included in gross income when it is actually or constructively received. The installment method allows greater deferral when the payment is received in the form of a negotiable note. The cash method does not allow for differing between cost recovery and gain.
Accrual method – The accrual method requires income to be recognized as soon as the taxpayer has a right to the income regardless of when the payment is actually received. As such, the taxpayer would have to recognize the full amount of the sale despite the fact that the purchase price may not be paid in full for years.
See also
- Tax
- Doctrine of cash equivalence
- Accounting methods
- Installment sale (USA)
- Revenue recognition
- Tax accounting
References
Sources
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Have handed an trade examination i.e Widespread Examination for House Brokers (CEHA) or Actual Property Agency (REA) examination, or equal; Exclusive brokers are extra keen to share listing information thus making certain the widest doable coverage inside the real estate community via Multiple Listings and Networking. Accepting a severe provide is simpler since your agent is totally conscious of all advertising activity related with your property. This reduces your having to check with a number of agents for some other offers. Price control is easily achieved. Paint work in good restore-discuss with your Property Marketing consultant if main works are still to be done. Softening in residential property prices proceed, led by 2.8 per cent decline within the index for Remainder of Central Region
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To achieve the very best outcomes, you must be always updated on market situations, including past transaction information and reliable projections. You could review and examine comparable homes that are currently available in the market, especially these which have been sold or not bought up to now six months. You'll be able to see a pattern of such report by clicking here It's essential to defend yourself in opposition to unscrupulous patrons. They are often very skilled in using highly unethical and manipulative techniques to try and lure you into a lure. That you must also protect your self, your loved ones, and personal belongings as you'll be serving many strangers in your home. Sign a listing itemizing of all of the objects provided by the proprietor, together with their situation. HSR Prime Recruiter 2010 - Many property agents need to declare for the PIC grant in Singapore. However, not all of them know find out how to do the correct process for getting this PIC scheme from the IRAS. There are a number of steps that you need to do before your software can be approved.
Naturally, you will have to pay a safety deposit and that is usually one month rent for annually of the settlement. That is the place your good religion deposit will likely be taken into account and will kind part or all of your security deposit. Anticipate to have a proportionate amount deducted out of your deposit if something is discovered to be damaged if you move out. It's best to you'll want to test the inventory drawn up by the owner, which can detail all objects in the property and their condition. If you happen to fail to notice any harm not already mentioned within the inventory before transferring in, you danger having to pay for it yourself.
In case you are in search of an actual estate or Singapore property agent on-line, you simply should belief your intuition. It's because you do not know which agent is nice and which agent will not be. Carry out research on several brokers by looking out the internet. As soon as if you end up positive that a selected agent is dependable and reliable, you can choose to utilize his partnerise in finding you a home in Singapore. Most of the time, a property agent is taken into account to be good if he or she locations the contact data on his website. This may mean that the agent does not mind you calling them and asking them any questions relating to new properties in singapore in Singapore. After chatting with them you too can see them in their office after taking an appointment.
Have handed an trade examination i.e Widespread Examination for House Brokers (CEHA) or Actual Property Agency (REA) examination, or equal; Exclusive brokers are extra keen to share listing information thus making certain the widest doable coverage inside the real estate community via Multiple Listings and Networking. Accepting a severe provide is simpler since your agent is totally conscious of all advertising activity related with your property. This reduces your having to check with a number of agents for some other offers. Price control is easily achieved. Paint work in good restore-discuss with your Property Marketing consultant if main works are still to be done. Softening in residential property prices proceed, led by 2.8 per cent decline within the index for Remainder of Central Region
Once you place down the one per cent choice price to carry down a non-public property, it's important to accept its situation as it is whenever you move in – faulty air-con, choked rest room and all. Get round this by asking your agent to incorporate a ultimate inspection clause within the possibility-to-buy letter. HDB flat patrons routinely take pleasure in this security net. "There's a ultimate inspection of the property two days before the completion of all HDB transactions. If the air-con is defective, you can request the seller to repair it," says Kelvin.
15.6.1 As the agent is an intermediary, generally, as soon as the principal and third party are introduced right into a contractual relationship, the agent drops out of the image, subject to any problems with remuneration or indemnification that he could have against the principal, and extra exceptionally, against the third occasion. Generally, agents are entitled to be indemnified for all liabilities reasonably incurred within the execution of the brokers´ authority.
To achieve the very best outcomes, you must be always updated on market situations, including past transaction information and reliable projections. You could review and examine comparable homes that are currently available in the market, especially these which have been sold or not bought up to now six months. You'll be able to see a pattern of such report by clicking here It's essential to defend yourself in opposition to unscrupulous patrons. They are often very skilled in using highly unethical and manipulative techniques to try and lure you into a lure. That you must also protect your self, your loved ones, and personal belongings as you'll be serving many strangers in your home. Sign a listing itemizing of all of the objects provided by the proprietor, together with their situation. HSR Prime Recruiter 2010