Installment Accounting Method [Tax] Law and Legal Definition
Installment accounting method is a method that allows a taxpayer to spread the revenue from a sale of property during the payment period by calculating the gross profit percentage from the sale and applying it to each payment. This method is a materialistic way of treating an installment sale because profit is not distinguished until payment is received. For instance, where a property having book value of $10,000, sold for $12,000, and where payment is to be made in 2 equal installments of $6,000 each, the seller would record annual profits of $1000 ($12,000-$10,000).
