how and when should revenue be recognized on the sales of land where buyer have the option of installment payment.
should it be;
1. at time the buyer show interest and pay the first installment
2. at the point the seller allocate the land on paper
3. at the point land is transfer to the buyer
4. any other
how should the amount be recognized annually
ACCA Forums
General ACCARevenue recognition on installment payment on the sales of land
It does not matter when the buyer makes the payment. You need to recognize the whole revenue immediately at the point the land is transferred to the buyer.
However, if the buyer is paying in installments you are not only selling him the land but also financing him to purchase your land. So effective you are selling him the land and giving him the loan as well.
Your Sales figure should be clearly split between the amount that is related sale of land and the amount that is related to loan.
That split of the sales figure need to be recognized as follows:
Revenue : Recognition
Land (at the point land is transferred to the buyer)
Financing (over the period the installments are paid)
Thank you warren92, your post was helpful and clears all doubts
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