Hire purchase accounting questions and answers pdf
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- Hire Purchase
- BCOM 1st Year Hire Purchase And Instalment Purchase System Short Question Answer Study Notes
- Hire purchase
- Accounting Problems on Hire Purchase, Instalments and Lease
Hire Purchase is a kind of agreement where the buyer buying an expensive asset chooses an option to pay for the asset by paying some down payment at the time of purchase of an asset and clearing the remaining dues in regular installments including interest. An Inc. Calculate the following:.
Chapter Outline. By now you must have been familiar to various aspects of Book-keeping and Accountancy. You must have understood the concept of double entry system. Now-a-days the books of accounts are maintained under double entry system by all big business houses and multinationals. You know that the sales is the Key factor of success of business.
Section A. What do you mean by hire-purchase system? It may be said that the hire-purchase system is a special system of credit purchase and sale of goods. Under this system a written agreement is entered into between buyer called owner by equal periodical as hire-purchaser and the seller called as hire-vendor for the purchase and sale of certain goods whereby goods are delivered to the hire of to the hire-purchase immediately on his signing the agreement on the condition then he will pay the purchase price by means of specified periodical instalments. Thus, till the last instalment is paid, the title or ownership in the goods still remains with the hire-vendor.
BCOM 1st Year Hire Purchase And Instalment Purchase System Short Question Answer Study Notes
Breaking News. State whether the following statements are true or false:. There is no difference between hire purchase and instalment purchase system. Payment made towards cash price to be treated as capital expenditure for the purchase of an asset. Interest paid on hire purchase is charged to profit and loss account because it is revenue expenditure. In hire purchase system, ownership of goods passes from the seller to the buyer only when full and final payment is made.
In this article we will discuss about the top twenty four accounting problems on Hire Purchase, Instalments and Lease with their relevant solutions. On 1st April, , Bihar Collieries obtained a machine on the hire purchase system, the total amount payable being Rs 2,50, Payment was to be made Rs 50, down and the balance in four annual instalments of Rs 50, each. Interest charged was at the rate of 15 per cent. At what value should the machine be capitalised? If amount due in the beginning of a year is Rs , interest for the year will be Rs 15 and the amount of instalment due at the end of the year will be Rs
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Which one of the following would not apply? To ascertain the profitability of each branch To record changes in assets, liabilities and capital To check for theft at the branch level To measure the qualities of staff Which account is used for transactions concerned with head office supplying resources to the branch? Suspense account Difference on exchange account No account should be opened Foreign exchange account The rules for how to deal with currency accounts are set out in which accounting standard? Instalment charges only Interest only Neither interest or instalment charges Interest and instalment charges According to the relevant accounting standard, when assets are bought by foreign branches on different dates how should we account for changes in the exchange rates on those dates?
Accounting Problems on Hire Purchase, Instalments and Lease
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A hire purchase HP ,  also known as an installment plan or the never-never , is an arrangement whereby a customer agrees to a contract to acquire an asset by paying an initial installment e. Other analogous practices are described as closed-end leasing or rent to own. The hire purchase agreement was developed in the United Kingdom in the 19th century to allow customers with a cash shortage to make an expensive purchase they otherwise would have to delay or forgo. For example, in cases where a buyer cannot afford to pay the asked price for an item of property as a lump sum but can afford to pay a percentage as a deposit , a hire-purchase contract allows the buyer to hire the goods for a monthly rent. When a sum equal to the original full price plus interest has been paid in equal installments, the buyer may then exercise an option to buy the goods at a predetermined price usually a nominal sum or return the goods to the owner.