How to Calculate Realized Gross Profit?

1st  Calculate the Gross Profit Rate

= Installment Sales / Cost of Installment Sales


Deferred Gross Profit / Installment Accounts Receivable

2nd Determine Cash Collections

Installment Accounts Receivable Beginning – Installment Accounts Receivable Ending

3rd Check if there is any Repossession 

Deduct the Unpaid Balance from the Total in 2nd steps

4th Multiply the Cash Collections by the Gross Profit Rate

How to determine the Net Income with Installment Sales ?

Gross Profit on Regular Sales                                xxx

Realized Gross Profit on Installment Sales       xxx

Total Realized  Gross Profit                                                       xxx

Operating Expenses                                                  (xxx)

Net Income                                                                   xxx

How to compute Loss on Repossession?

Defaulted Account on Merchandise Repossessed    xxx

Multiply by Cost Ratio                                                       xxx

Unrecovered  Cost                                                               xxx

*Compare the Unrecovered Cost to Appraised Market Value of Repossessed Merchandise equals Gain or Loss on Repossession

How to calculate Installment Account Receivable End?

Installment AR Beg   xxx

Collections                    (xxx)

Repossessed Account (xxx)

Write Off                          (xxx)

Installment AR End       xxx



About Jonathan Ruiz CPA

Entrepreneur, CPA Mentor, Stock market Newbie Mentor, Influential Author and Master's Degree in International Business graduate in Hult International Business School, UK. A father of two lovely daughters.
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