The installment sales method of recognizing profit for accounting purposes is acceptable if collection of the sales price is not reasonably assured.

Question

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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.

The Installment Sales Method of Recognizing Profit for Accounting Purposes