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Installment Method

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installment method
The accounting method of treating revenue from the sale of an asset on installments such that profits are recognized in proportion to the percentage of the sale price collected in a given accounting period. For example, if an asset with a book value of $12,000 is sold for $15,000 and payment is to occur in 5 equal installments of $3,000 each, the seller would record annual profits of ($15,000 - $12,000)/5, or $600. The installment method is a conservative way of treating an installment sale because profit is not recognized until receipt of payment.
Installment Method
A method of accounting enabling a taxpayer to spread the recognition of gain on the sale of property over the payment period. Under this procedure, the seller computes the gross profit percent from the sale (that is, the gain divided by the contract price) and applies it to each payment received to arrive at the amount of the gain to be recognized.


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In Gimbel, the taxpayer had used the accrual method, which was impermissible given the installment method election it had made.
Change in accounting method vs. correction of an error by Schuth, Michael R. / The Tax Adviser
72 in a manner similar to the installment method of IRC Sec.
Annuity structure: private annuity transactions can help clients cash ... by Stein, Jacob / California CPA
The company had sold property in 1995, reporting the gain on the installment method.
Computing the accumulated earnings tax by Schnee, Edward J. / Journal of Accountancy
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