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A client in the retail industry has come to you for an explanation.The client's company offers installment sales contracts to some of its customers, and the client believes that the installment method of revenue recognition must be the only way to account for such contracts.
Required:
Explain the difference between installment sales contracts and the installment method of revenue recognition.
Opportunity Cost
The cost of choosing one option over another, representing the benefits an individual, investor, or business misses out on when choosing one alternative over another.
Stand-Alone Principle
A method of evaluating a project or investment by analyzing its viability and potential profitability as if it were the only project the company is undertaking.
Incremental Costs
Additional costs that a company incurs when increasing production or undertaking new projects.
Pro Forma Financial Statements
Financial reports that project the future financial position of a company, based on current data and assumptions.
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