Installment Sales

Chapter 5

Allan R.Drebin

Installment sales

The installment method of accounting normally implies the deferral of gross profit but the recognition of selling and administrative expenses in the period of their incurrence.

Sale of Real estate on Installment basis

Recognition of profit in period of saleRecognition of profit periodically in

Proportion to collections.

Recognition Profit in period of sale

Pada saat Real estate dijual:Receivable from …XXX

Real estate XXXGain on sale XXX

Pada saat terima uang mukaCash XXXMortgage Note XXX

Receivable from … XXX

Recognition of Profit in Period of sale

Pada saat bayar Biaya2 Penjualan

Selling expenses XXX

Cash XXX To adjust accounts for Accrued Interest.

Accrued Interest on Mortgage XXX

Interest Income XX

Recogniton of profit in period of sale

Menutup Nominal Accounts

Gain on sale XXX

Interest Income XXX

Selling expenses XXX

Income Summary XXX

Recognition of Profit periodically in Proportion to collections

Pada saal jual Real Estate:Receivable from… XXX

Real Estate XXXDeferred Gross ProfitXXX

Pada saat terima Down Payment:Cash XXXMortgage Note XXX

Receivable from… XXX

Recognition of Profit periodically in Proportion to collections

Membayar biaya2 penjualan:

Selling expenses XXX

Cash XXX To adjust accounts for Accrued Interest.

Accrued Interest on Mortgage XXX

Interest Income XX

Recognition of Profit periodically in Proportion to collections

Pengakuan Laba kotor:Deferred Gross Profit XXX

Realized Gross Profit XXX Menutup Nominal Accounts:

Realized GP XXXInterest Income XXX

Selling expenses XXXIncome Summary XXX

Sale of merchandise on installment basis

Penjualan anggsuran:Installment contract Receivable XX

Installment sales XX Saat terima tagihan:

Cash XXXInstallment contract Receiv. XXX

To adjust and closing:Cost installment sales XXX

Shipment on installment sales XXX

Sale of merchandise on installment basis

To close installment sales and cost of installment sales:Installment sales XXX

Cost of installment sales XXXDeferred GP XXX

Pengakuan GP setelah ada collectionDeferred GP XXX

Realized GP XXX

Trade-Ins

The value of trade-in and the amount of the overallowance are calculated as follows:

Amount allowed on trade-in XX

Value of article traded in:

Sale value of article XX

Less:Reconditioning cost XX

GP to be realized XX XX XX

Overallowance XX

Trade-Ins

Merchandise –Trade-ins XXX

Overallowance on Inst.Sale XXX

Installment Contracts Rec. XXX

Insatllment sales XX

Cost of installment sales XXX

Merchandise-New XX

Defaults and Repossession

Merchandise –Repossession XXX

Deferred GP XXX

Loss on Repossessions XXX

Installment contrat Rec. XX

Interest on installment Contracts

Periodic interest on balance of principal owed between installments

Periodic interest on installment dueEqual periodic payments that represent

interest and principalPeriodic interest computed on original

principal.