Under the installment-sales method,
A) revenue, costs, and gross profit are recognized proportionate to the cash that is received from the sale of the product.
B) gross profit is deferred proportionate to cash uncollected from sale of the product, but total revenues and costs are recognized at the point of sale.
C) gross profit is not recognized until the amount of cash received exceeds the cost of the item sold.
D) revenues and costs are recognized proportionate to the cash received from the sale of the product, but gross profit is deferred until all cash is received.

Question

Quizplus · Accepted Answer

Under the installment-sales method, gross profit is deferred in proportion to the cash that remains uncollected from the sale of the product. This means that while the total revenues and costs are recognized at the point of sale, the recognition of gross profit is delayed until the cash payments are received. This method helps in matching the revenue recognition with the actual cash flow, providing a more accurate financial picture when there is a significant delay in receiving payments.

Under the Installment-Sales Method