Installment Method Definition

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Definition Of Installment Method:

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.

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