Final answer:
The installment-sales method recognizes revenue and profit over the period of time the customer makes installment payments, while the cost-recovery method recognizes revenue and profit only after the seller has recovered the cost of the goods.
Step-by-step explanation:
The installment-sales method and the cost-recovery method are two different ways to recognize revenue and profit from sales transactions over a period of time.
The installment-sales method is used when a company sells goods to a customer and allows the customer to pay for the goods in multiple installments. Under this method, revenue and profit are recognized in proportion to the amount of cash received from the customer. This means that revenue and profit are recognized over the period of time that the customer makes the installment payments.
The cost-recovery method, on the other hand, is used when there is a high degree of uncertainty regarding the collectability of the sales price. Under this method, the seller does not recognize any profit until the total cash collected from the customer equals or exceeds the cost of the goods. This means that revenue and profit are recognized only after the seller has recovered the cost of the goods.