There are several accounting methods available depending on two factors. 1. The collectability of the sales value; and 2. The seller’s involvement in the property after the sale.
If the collectability is reasonably assured or the uncollectible amount can be estimated and the seller has no post-sale obligations, then the full accrual method should be used, which recognizes all costs and profits at the date of sale. Otherwise, different methods are available which alter the timing of profit recognition. The most common of these include:
- The deposit method
- The cost recovery method
- The installment method
- The reduced profit method
- The percentage of completion method