Because payment for a product sold on an installment basis is spread over a relatively long period, the risk of loss resulting from uncollectible accounts is greater in installment sales transactions than in ordinary sales.

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In installment sales, payments are spread over a period, increasing the duration of exposure to credit risk, thus making the risk of loss from uncollectible accounts higher compared to ordinary sales where payments are typically made in a shorter timeframe.

Because Payment for a Product Sold on an Installment Basis