When Using the Installment Sales Method

question 34

Multiple Choice

When using the installment sales method,

• A) total revenues and costs are recognized at the point of sale,but gross profit is deferred in proportion to the cash that is uncollected from the sale.
• B) gross profit is recognized only after the amount of cash collected exceeds the cost of the item sold.
• C) revenue,costs,and gross profit are recognized proportionally as the cash is received from the sale of product.
• D) gross profit is deferred until all cash is received,but revenues and costs are recognized in proportion to the cash collected from the sale.

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Definitions:

General Ledger

A complete record of all financial transactions over the life of an organization, serving as the primary source of information for financial reporting.

Shareholders' Equity

The residual interest in the assets of a company after deducting its liabilities.

Liabilities

Liabilities represent financial obligations or amounts owed by a business to creditors, which can include loans, accounts payable, mortgages, and other debts.