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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 sale
Recognition of profit periodically in
Proportion to collections.
Recognition Profit in period of sale
Pada saat Real estate dijual:
Receivable from …XXX
Real estate
XXX
Gain on sale
XXX
Pada saat terima uang muka
Cash
XXX
Mortgage 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
XXX
Deferred Gross ProfitXXX
Pada saat terima Down Payment:
Cash
XXX
Mortgage 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
XXX
Interest Income XXX
Selling expenses XXX
Income Summary XXX
Sale of merchandise on installment basis
 Penjualan anggsuran:
Installment contract Receivable XX
Installment sales
XX
 Saat terima tagihan:
Cash
XXX
Installment 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 XXX
Deferred GP
XXX
Pengakuan GP setelah ada collection
Deferred 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
Overallowance on Inst.Sale
Installment Contracts Rec.
Insatllment sales
Cost of installment sales
Merchandise-New
XXX
XXX
XXX
XX
XXX
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 due
Equal periodic payments that represent
interest and principal
Periodic interest computed on original
principal.