标题: Installment Method vs. % of Completion [打印本页] 作者: Makavelim3 时间: 2011-7-11 17:39 标题: Installment Method vs. % of Completion
What is the real difference?作者: dcfox83 时间: 2011-7-11 17:39
Percentage of completion is a method of accounting for LT contracts under US GAAP and IFRA when the outcome of the project can be predicted reliably.
Installment sales is a method of accounting for sales (as in general goods and services), where consumation of the sale is not over an extended period. The handover of inventory is immediate, but only payments are received over a period of time.
Good question. Not too many people look into such subtleties. I am impressed.作者: kmf229 时间: 2011-7-11 17:39
to expand...
the installment sales method is when you are collecting cash through more than 1 period and need to allocate profits accordingly. it is used if you cannot determine the actual amount of collections in advance whereas with the % completion, you assume that you will collect and know when you will collect (so you recognize revenue as you do the work and incur costs).
this is why for the installment method you get the gross profit % for each year, then as you collect cash from sales done in said period, you recognize profit based on that percentage.
for the % completion, you just multiply the expected revenue times the proportion of cost that was completed in that period, so you recognize the profit right away.
