This matter is discussed in some detail for the reason that many bookkeepers make incorrect entries when closing out contract accounts, usually reasoning as follows:

The contract balance is $3,200, the property is worth $2,700, and the original gain was $900; therefore the entry is the following:

Real Estate.............................

$2,700

Gain on Sales..........................

900

To Contracts..........................

$3,200

" Profits.........................................

400

The fact that a part of this profit has already been carried to Profit and Loss is overlooked.

Another erroneous form is as follows:

Real Estate...........................

$2,700

Gain on Sales (Originally $900).......................

(Cash paid in 400).....................

500

To Contracts........................................

$3,200

In each of these cases, it will be seen that an amount is left in Gain on Sales account which is unaccounted for; in the first instance, $80, and in the second, $320 (i.e., $900 - $80 - $500).