Installment Sales

(Akuntansi Penjualan
Angsuran)
Chapter 5 I Allan R.Drebin I
Learning Objectives

Definition of Installment Sales

Sale of Real Estate on Installment Basis

Sale of Merchandise on Installment Basis

Installment Definition

It refers to a type of sales transaction where the

buyer pays for the goods in installments over a
period of time, typically with the help of a loan
from the seller or a third-party lender. The buyer
receives the goods immediately but does not own
them outright until the full purchase price has
been paid
Benefit and Drawbacks

FOR BUYER? FOR SELLER?

Installment Sales Accounting for Real Estate

Real estate companies can

apply two gross profit
recognition methods:
1. Gross profit recognition in
the period of sale,
2. Gross profit recognition
proportionally over the
collection period
Journal entry for gross profit recognition in
the period of sale
1. Sale of real estate
Receivable from….. xxx
Real Estate xxx
Gain on sale of Real Estate xxx

2. Receipt cash for down payment

Cash xxx
Mortgage Note xxx
Receivable from….. xxx
Journal entry for gross profit recognition in
the period of sale
3. Pay the selling expenses
Selling expenses xxx
Cash xxx

4. Adjusting entries for the accrued interest

Accrued Interest on Mortgage xxx

Interest Income xxx
Journal entry for gross profit recognition in
the period of sale
5. Close temporary accounts
Gain on sale of real estate xxx
Interest income xxx
Selling Expenses xxx
Income Summary xxx
Journal entry for gross profit recognition
proportionally over collection period
1. Sale of real estate
Receivable from….. xxx
Real Estate xxx
Deferred Gross Profit xxx

2. Receipt cash for down payment

Cash xxx
Mortgage Note xxx
Receivable from….. xxx
Journal entry for gross profit recognition
proportionally over collection period
3. Pay the selling expenses
Selling expenses xxx
Cash xxx

4. Adjusting entries for the accrued interest

Accrued Interest on Mortgage xxx

Interest Income xxx
Journal entry for gross profit recognition
proportionally over collection period
5. Recognize gross profit
Deferred Gross Profit xxx
Realized Gross Profit xxx

6. Close temporary accounts

Realized Gross Profit xxx
Interest income xxx
Selling Expenses xxx
Income Summary xxx
Examples – Sale of Real
Estate on installment basis

On October 1, 2022 Westwood Realty Company

sold property with a cost of $30,000 to Mr. South.
On that date Westwood received $10,000 in cash and
a Mortgage Note worth $40,000 payable in 20
semiannual installments (every 6 months) of $2,000
plus 12% interest on the unpaid principal.
Commissions and other fees in this transaction
amounting to $1,500 were paid in cash.
Installment payments for the principal and interest
on the Mortgage Note began to be received by the
company at the beginning of 2023.
 Transactions Recognition of Profit in Period of Sale Recognition of Profit Periodically in
Proportion to Collections

1 Okt 2022 Receivable from South..... 50,000 Receivable from South..... 50,000
Menjual real estate, cost Real estate ............................... 30,000 Real estate ............................... 30,000
$30,000, senilai $50,000 Gain on sale .............................20,000 Deferred Gross Profit ............20,000

Menerima uang muka Cash ............................... 10,000 Cash ............................... 10,000

$10,000 dan mortgage note Mortgage Note ................ 40,000 Mortgage Note ................ 40,000
$40,000 Receivable from South ........... 50,000 Receivable from South ........... 50,000

Membayar biaya-biaya Selling expenses ............. 1,500 Selling expenses ............. 1,500
penjualan $1,5000 Cash ....................................... 1,500 Cash ....................................... 1,500

31 Desember 2022 Accrued interest Accrued interest

Penyesuaian atas: on mortgage Note ............ 1,200 on mortgage Note ............ 1,200
(1) Accrued interest dari Interest Income ...................... 1,200 Interest Income ...................... 1,200
mortgage note $1,200
($40,000; 12%; 3 bln).
(2) Realisasi gross profit Deferred Gross Profit ........ 4,000
sebesar $4,000 * Realized Gross Profit .............. 4,000
 Transactions Recognition of Profit in Period of Sale Recognition of Profit Periodically in
Proportion to Collections

31 Des 2022 Gain on sale .................. 20,000 Realized Gross Profit ... 4,000
Menutup akun nominal Interest Income ............. 1,200 Interest Income ............. 1,200
Selling Expenses .................... 1,500 Selling Expenses .................... 1,500
Income Summary ................... 19,700 Income Summary ................... 3,700

1 Jan 2023 Interest Income ............. 1,200 Interest Income ............. 1,200
Membalik accrued interest Accrued interest ....................... 1,200 Accrued interest ....................... 1,200

1 Apr 2023 Cash .............................. 4,400 Cash .............................. 4,400

Menerima pembayaran Mortgage Note ........................ 2,000 Mortgage Note ........................ 2,000
pertama (per 6 bulan) atas Interest Income ....................... 2,400 Interest Income ....................... 2,400
mortgage note $2,000 dan
bunga $2,400 ($40,000; 12%;
6 bln)

1 Okt 2023 Cash .............................. 4,280 Cash .............................. 4,280

Menerima pembayaran kedua Mortgage Note ........................ 2,000 Mortgage Note ........................ 2,000
(per 6 bulan) atas mortgage Interest Income ....................... 2,280 Interest Income ....................... 2,280
note $2,000 dan bunga $2,280
($38,000; 12%; 6 bln)
 Transactions Recognition of Profit in Period of Sale Recognition of Profit Periodically in
Proportion to Collections

31 Desember 2023 Accrued interest Accrued interest

Penyesuaian atas: on mortgage Note ............ 1,080 on mortgage Note ............ 1,080
(1) Accrued interest dari Interest Income ...................... 1,080 Interest Income ...................... 1,080
mortgage note $1,080
($36,000; 12%; 3 bln).
(2) Realisasi gross profit Deferred Gross Profit ........ 1,600
sebesar $1,600 * Realized Gross Profit .............. 1,600

31 Des 2023 Interest Income ............. 4,560 Realized Gross Profit ... 1,600
Menutup akun nominal Income Summary ................... 4,560 Interest Income ................ 4,560
Income Summary ................... 6,160
Assume that on April 1 2024 the buyer (Mr. South) stated that he was no longer able to pay the
installments (default). The seller was forced to hand over the mortgage note to the issuing bank with
an unpaid balance of $36,000 and take back the property. On this date the estimated market value of
the property was $28,500

Transactions Recognition of Profit in Period of Sale Recognition of Profit Periodically in

Proportion to Collections

Menarik kembali properti Real Estate ....................... 28,500 Real Estate ..................... 28,500
yang bernilai $28,500 dari Loss on repossession .... 7,500 Deferred Gross Profit ..... 14,400
tangan pembeli dan Mortgage Note ........................ 36,000 Mortgage Note ........................ 36,000
menyerahkan kembali Gain on repossession .......... 6,900
mortgage note kpd pihak
bank (saldo $36,000)
Installment Sales Accounting for
Merchandise
Journal entry merchandise sale on installment
basis
1. Sale of merchandise in installment
Installment Contract Receivable xxx
Installment Sales xxx

2. Receipt cash
Cash xxx
Installment Contract Receivable xxx

Cost of Installment Sales xxx

Shipment on installment sales xxx
Journal entry merchandise sale on installment
basis
3. Close the temporary accounts
Installment Sales xxx
Cost of Installment Sales xxx
Deferred Gross Profit xxx

4. Recognition of gross profit after cash receipt

Deferred Gross Profit xxx
Realized Gross Profit xxx
Example Installment Sales - Merchandise
The following is Kelton Company's Financial Position Report (balance sheet) as of January 1,
2022 (in $):
Cash 25,000 Account Payable 40,000
Merchandise Inventory 100,000 Deferred gross profit on 22,800
installment sales, 2021
Account Receivable (regular) 15,000 Deferred gross profit on 7,000
installment sales, 2020
Installment Contracts 60,000 Capital Stock 100,000
Receivable, 2021
Installment Contracts 20,000 Retained earnings 50,200
Receivable, 2020
Total Assets 220,000 Total liabilities and 220,000
stockholders’ equity

Note: Installment sales in 2021 and 2020 generated gross profits, respectively, of 38% and 35%. (information to calculate deferred
gross profit)
Transaksi dan pencatatan pada pembukuan Kelton Company pada tahun 2022 sbb:
Transaksi
1 Januari s.d. 31 Desember
(1) Penjualan reguler berupa cash sales
$250,000 dan sales on account $200,000,
serta installment sales $150,000
(2) Membeli barang dagangan secara kredit
$425,000
Jurnal
Cash ........................... 250,000
Account Receivable .... 200,000
Sales ..................................... 450,000
Installment Contracts
Receivable, 2022 ........ 150,000
Installment Sales .................. 150,000
Purchases ................... 425,000
Account Payable ................... 425,000
 Transaksi
(3) Menerima pembayaran atas:
Account receivable (regular).... $190,000
Installment Contracts
Receivable, 2022 ................. 80,000
Installment Contracts
Receivable, 2021 ................. 40,000
Installment Contracts
Receivable, 2020 ................. 15,000
(4) Membayar:
Account Payable ...$435,000
less discount .......... 5,000... $430,000
Operating expenses ............... 120,000
Jurnal
Cash ........................... 325,000
Account Receivable
(reguler) ................................. 190,000
Installment Contract
Receivable, 2022 ................... 80,000
Installment Contract
Receivable, 2021 ................... 40,000
Installment Contract
Receivable, 2020 ................... 15,000
Account Payable........... 435,000
Operating Expenses ..... 120,000
Purchases discount ................ 5,000
Cash ....................................... 550,000
(5) Penyesuaian dan penutupan per 31 Desember:
Mencatat cost of goods penjualan cicilan $90,000
(6) Menutup akun installment sales dan cost of
installment sales dan mencatat gross profit dari
installment sales sebesar $60,000 (40% x installment
sales)
(7) Mencatat gross profit yang direalisasikan atas
penjualan cicilan thn 2022, 2021, dan 2020:
Thn 2022, 40% x $80,000 = $32,000
Thn 2021, 38% x $40,000 = $15,200
Thn 2020, 35% x $15,000 = $5,250
Cost of installment
Sales ........................... 90,000
Shipments on
Installment Sales ................... 90,000
Installment sales .......... 150,000
Cost of installment
sales ...................................... 90,000
Deferred gross profit
on installment sales, 2022 ..... 60,000
Deferred gross profit on
installment sales, 2022 ....... 32,000
Deferred gross profit on
installment sales, 2021 ....... 15,200
Deferred gross profit on
installment sales, 2020 ....... 5,250
Realized gross profit on
installment sales,
2020 – 2022 .................................... 54,450
(8) Menutup persediaan awal, purchase, purchase Income Summary.......... 430,000
discount, dan shipments on installment sales ke Income Shipments on installment
Summary (untuk mendapatkan persediaan siap untuk sales …………………………..90,000
dijual $430,000) Purchase discount………….5,000
Merchandise Inventory
Jan 1 2022 ............................... 90,000
Purchases……………………………425,000
(9) Mencatat persediaan akhir, dengan COGS sebesar $ Merchandise Inventory
310,000 Dec 31, 2022 ………………..120,000
Income Summary……………………120,000

(10) Menutup penjualan regular (requler sales) ke Income Sales (Reguler)............... 450,000
Summary Income Summary……………………450,000

(11) Menutup realized gross profit on installment sales Realized Gross Profit on
tahun ini dan sebelumnya ke Income Summary Installment Sales 2022-2023 …..120,000
Income Summary……………………………120,000
(12) Menutup beban operasi ke Income Summary Income Summary.......... 120,000
Operating Expenses………………120,000
(13) Mencatat beban pajak penghasilan Income Tax Expense.......... 28,980
Income tax payable………………28,980

(10) Menutup beban pajak penghasilan Income Summary............... 28,980

Income Tax Exp……………………28,980

(11) Menutup laba ke retained earning Income Summary............... 43,470

Retained Earning……………………43,470