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hello and welcome to this session this is professor farhat in which we will discuss the cost recovery method the cost recovery method is the most conservative method in recognizing profit simply put it waits until you recover your cost before you recognize any profit on any particular sale the cost recovery method the cost recovery method is used when you collect your cash over a period of time because youre waiting until you recover your cost and theres no basis of estimating incollectible simply put theres a high degree of incollectibility simply put you make a sale you sell something and you ask the customer to make installment sales to make payments but you cannot recognize any profit until you recover your cost maybe you dont recover your costs until the third payment or the fifth payment or the sixth payment why because you dont know whether youre going to collect enough to recover your cost because if you dont recover your cost you should not have any profit well then gu
