Hire_Purchase.ppt
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Hire Purchas Purchasee Accounts
Hire Purchase
Hire Purchase (HP) is one of the payment methods of which the buyer use the goods without immediate full settlement of the price of the goods
With Hire Hire Purchase Purchase Agreement The HP selling price includes normal Cash Price PLUS HP Interest The seller agreed that the buyer could hire the goods by payments of deposit! and instalments!
Hire Purchase Price =
Cash Price
+ Total Hire Purchase Interest
OR
=
Deposit (Down payment)
+
Outstanding Balance (including HP interest paid y instalments
Calculation of Hire Purchase Interest
Straight line method (b) "ctuarial #ethod (c) Sum$of$digits #ethod (a)
!traight "ine #ethod($%ual apportionment)
%
Interest is apportioned e&enly o&er the number of installments agreed upon'
HP Interest per instalment Total HP Interest umber of total instalments
Example 1 "n asset is ac*uired on the following terms+ Cash price ,-... /own payment ,0... HP Price ,011.. ominal rate of interest 0.2 3our annual instalments ,14..
&nswer'
Total HP interest = $12000$!000 =$"200 HP interest pa#ale per annum = $"200%& = $'00 () An alternati*e +a# to calculate hire purchase interest ,$!000$1000-.10/ = $'00 ear 1 2 " &
HP interest Capital $ $ 2000 '00 2000 '00 2000 '00 2000 '00
=
Instalments $ 2'00 2'00 2'00 2'00
3 Actuarial 4etho5
Interest is charged on the outstanding balance of the cash price after the down payment is made' 0' 5*ual instalments 1' Une*ual instalment
1 E6ual instalment E6ual instament = HP price 7 8o+n pa#ment 9o3 of instalment
56ample 1
"n asset is ac*uired on the following terms+ Cash price ,-... /own payment ,0... HP price ,00.-7 Interest 0.2 on outstanding balance 3our annual instalment ,1819
,110!:1000-%&
ear 1 2 " &
HP interest :2umof5igits of total instalment
56ample 9
" motor &ehicle was purchased under a hire purchase agreement Cash price ,0.... Hire Purchase ,0:7.. Instalments 9 months /ate of sale 0 =ctober 0--7 Calculate the interest under each of the three cases+ (a) 3irst instalment due at the end of month from the date of sale (b) 3irst instalment due at the beginning of month following the date of sale (c) 3irst instalment due at the date of sale'
Total HP interest =$1":00$10000=$":00 >um of 5igit= &.,&1-%2=10 Case ,a- an5 , Interest pai5 1st instalment
$":00.&%10=$1&&0
2n5 instalment "r5 instalment &th instalment
$":00."%10=$10'0 $":00.2%10=$um of 5igit= ".,"1-%2=: Case , C Interest pai5 1st instalment
$":00."%:=$1'00
2n5 instalment "r5 instalment &th instalment
$":00.2%:=$1200 $":00.1%:=$:00
Concept Chart Hire Purchase u#er Assets account
Hire purchase cre5itors account
Hire purchase interest suspense account
>eller Hire purchase interest account
Hire purchase sales
Pro*ision for unreali?e5 profit
Hire purchase 5etors account
Purchaser@s oos
Ac6uisition of Assets on Hire Purchase %
>hen an asset is ac*uired on hire purchase< there are 1 ways to account for this in the purchaser!s boo?s' 0' Progress interest charge system 1' Interest Suspense #ethod % They differ mainly in the way they record hire purchase interest'
#ethod o HP Interest Treatment (i) Progress interest charge system (ii) Interest suspense method
= : Bersion
. " metho5 of HP Interest Apportionment ,i- >traightline metho5 ,ii- Actuarial metho5 ,iii- >umof5igit metho5
Progress interest charge s#stem
Interest is charged upon each instalment'
Progress interest charge s#stem Dr Fixed assets Cr HP Creditor
With cash price of assets (at the date of purchase)
Dr HP Creditor Cr Bank
With deposit and instalment paid
Dr HP Interest Cr HP Creditor
With hire purchase interest accrued for the current year (at the year end)
Dr Profit and Loss (expense) Cr HP Interest
With the amount of hire purchase interest transferred to current years profit and loss account
Dr Profit and Loss Cr Pro!ision for depreciation
"nnual depreciation char#ed on full cash price of the asset
9otes DCut off of the financial perio5 shoul5 e a+are in or5er to calculate the total hire purchase interest of the financial perio5 to e reflecte5 in the P% account as an Fexpense@ item DEach financial #ear ma# inclu5e up to 12 monthl# instalmentG & 6uarterl# instalment or 2 half#earl# instalment
alance >heet Presentation
3or instance+ after 0 st instalment Paid
Pro#ress interest char#e system$
alance >heet , Instalment for 1 st #ear$ Current iailities HP Cre5itor ,Instalment for 2n5 #earInstalment for 2n5 #ear 7 Interest pa#ale for 2n5 #ear ong term iailities HP Cre5itor ,Instalment for "r5 #ear an5 so on(utstan5ing HP cre5itor 7 HP cre5itor on current liailities
3or instance+ after 0 st instalment Paid
Interest %uspense ðod$
alance >heet , Instalment for 1 st #ear$ Current iailities HP Cre5itor ,Instalment for 2n5 #earess HP interest suspense ,Interest pa#ale for 2n5 #ear (utstan5ing HP cre5itor 7 Instalment for next #ear ong term iailities HP Cre5itor ,Instalment for "r5 #ear an5 so on- ess HP interest suspense (utstan5ing interest suspense 7 interest Pa#ale for 2n5 #ear
,
Example @efer to te6tboo? P'19
Example : "AC Ltd' purchased a &ehicle from Brace Ltd' on 0 an 0--7 on HP agreement' The details were as follows Cash price ,-... /own payment ,0... HP Price ,00.-7 ominal rate of interest 0.2 on outstanding balance 3our e*ual annual instalments 3irst due :0 /ec 0--7 /epreciation 0.2 on cost 'sin# (a) the pro#ress interest char#e system and (b) interest suspense method< sho transactions in
ooks of "BC Ltd*
Ans+er ,a- Total HP interest= HP price 7 Cash Price = 110!: 7 !000 = 20!:
E6ual instalments = ,110!: 71000-%& =2;2&
Hire purchase Cre5itor ,race t51%1%!: an5eposit
1G000
1%1%!: Behicle
"1%12 aninstalment
2G;2&
"1%12 HP Interest
"1%12 alance c%5
:G2heet as at "1 8ec ,ExtractJixe5 Assets Behicle ess Pro for 8ep
!: !000 !00 '100
Current iailities HP Cre5itor 1'!:
!< !000 1'00 ith the cost of the asset
/r Pro&ision for depreciation Transferring related depreciation pro&ision to the disposal account Cr /isposal /r Aan? Cr /isposal
>ith the insurance claim for the disposal (if any)
/r Profit and Loss Cr /isposal
>ith the loss on the disposal (@e&erse the entries for a profit on disposal)
Example <
Example <
Cash Price Pro& for dep
,8... ,:1..
( " full year dep is charged in the year of purchase< but none in the year of disposal)
HP creditor on 0 an 0--7 ,04.. Instalments ,18.(monthly) Interest ,8. The car was in&ol&ed in an accident in #ay 0--7 resulting in a total write off< and the sum of ,0... was recei&ed from the insurnance company' "ll instalments up to and including :0 #ay were paid' " payment of ,-:. was made on :. une 0--7 in full settlement
HP Cre5itor 1!!: $ 1!!: 4a# "1 an 7instalment 12;0 Kan 1 al %f 8ec "1 HP interest ,$2;0.;,$;0.:Kune"0 ansettlement !"0 8ec "1 HP interest penalt# 21'0
$ 1'00 "00
'0 21'0
HP interest 1!!: 8ec "1 HP Cre5itor ,"00'0-
$ "'0
1!!: 8ec "1 P%
$ "'0
8isposal of Behicle 1!!: Kun "0 Behicle
$ ;000
1!!: Kun "0 8ep Kun "0 an insurance 8ec "1 P% loss
;000 8ep Behicle 1!!: Kun "0 8isposal
$ 1!!: "200 Kan 1 %f
$ "200 1000 '00 ;000 $ "200
Behicle 1!!: Kan %f
$ ;000
1!!: Kun "0 8isposal
$ ;000
1'
Interest suspense method Summary of procedures
/r HP Creditor Cr Aan?
>ith the last payment to the HP creditor
/r HP interest Cr HP interest suspense
>ith the HP interest for the current year
/r HP Creditor Cr /isposal
>ith any outstanding balance in the HP creditor account
/r /isposal Cr HP Interest suspense
>ith any outstanding balance in the HP interest suspense account
/r /isposal Cr "sset
>ith the cost of the asset
/r Pro&' for /epn' Cr /isposal
Transferring the related depreciation pro&ision to the disposal account
/r Aan? Cr /isposal
>ith the insurance claim for the disposal (if any)
/r Profit and Loss Cr /isposal
>ith the loss on the disposal (@e&erse the entries for a profit on disposal)
Example '
Example ' Cash Price
,8... Pro& for dep ,:1.. ( " full year dep is charged in the year of purchase< but none in the year of disposal) HP creditor on 0 an 0--7 ,118. Instalments ,18.(monthly) Interest ,8. HP interest suspense ,98. The car was in&ol&ed in an accident in #ay 0--7 resulting in a total write off< and the sum of ,0... was recei&ed from the insurnance company' "ll instalments up to and including :0 #ay were paid' " payment of ,-:. was made on :. une 0--7 in full settlement
HP Cre5itor 1!!: $ 1!!: 4a# "1 an 7instalment 12;0 Kan 1 ,$2;0.;Kune"0 ansettlement Kun "0 8isposal
al %f
!"0 ith the cash selling price of price of the sale'
/r HP debtor Cr HP interest suspense
>ith the total HP interest
/r Aan? Cr HP debtors
>ith the deposit and installments recei&ed
/r HP interest suspense Cr HP interest F PGL(income)
>ith the hire purchase interest recei&able for the current period
/r HP Sales Cr HP Trading
Transfer the HP sales to HP trading account
Example !
Example ! " company selling on HP has the following details+ de tails+ The interest is accrued e&enly throughout the period of HP agreement The gross profit on the sales is recogniEed in the year of sales Sales &olume 1 units /ate of sale 0 an 0--7 Cash price,01.. HP price ,1... Cost ,0... /own payment IL Instalments ,18.4 *u *uarterly 3irst due :0 #ar 0--7
HP 8etors 1!!: $ 1!!: Kan 1 HP >ales 8ec "1 aninstalment ,$1200.22&00 ,$2;0.&.2Kan 1 Interest suspense 1:00 8ec "1 al c%5 &000 ,20001200-.2 Cash price HP >ales 1!!: $ 1!!: 8ec "1 HP Tra5ing 2&00 Kan 1 HP 8etors HP interest suspense 1!!: $ 1!!: 8ec "1 HP interest Kan 1 HP 8etors recei*e5 ,20001200-.&%'.2 '00 8ec "1 al c%5 '00 1:00 HP interest recei*e5 1!!:
$
1!!:
$ 2000 2000 &000 $ 2&00
$ 1:00
1:00 $
Tra5ing an5 profit an5 loss account for the #ear en5e5 ,Extract!: >ales ,cash priceess cost of goo5s sol5 HP ross profit A55 HP interest recei*e5
$ 2&00 2000 &00 '00
alance >heet as at "1 8ec ,Extract!: Current Assets HP 8etors ess Interest suspense
$ 2000 '00 1200
1!!: Kan 1 HP >ales ,$1200.2-
HP 8etors $ 1!!: 8ec "1 aninstalment 2&00 ,$2;0.&.2-
Kan 1 Interest suspense 1:00 8ec "1 al c%5 ,20001200-.2 &000 1!!< Kan 1 al %5
$ 2000 2000 &000
1!!< 2000 8ec "1 an instalment 2000
HP interest suspense 1!!: $ 1!!: Kan 1 HP 8etors 8ec "1 HP interest recei*e5 ,20001200-.&%'.2 '00 8ec "1 al c%5
$ 1:00
'00 1:00
1!!< 1!!< 8ec "1 HP interest '00 Kan 1 al %5 recei*e5 ,20001200-.&%'.2
1:00 '00
Interest recei*e5 1!!: 8ec "1 P%
$ '00
1!!: $ 8ec "1 HP interest suspense '00
Tra5ing an5 profit an5 loss account for the #ear en5e5 ,Extract!: !< $ >ales ,cash priceess cost of goo5s sol5 HP ross profit A55 HP interest recei*e5
$ 2&00 2000 &00
$
'00
'00
alance >heet as at "1 8ec ,Extract!: Current Assets HP 8etors ess Interest suspense
$ 2000 '00 1200
$
!< $
3 Profit suspense metho5
The profit suspense method has the following characteristics+ 0' The hire purchase sale is recorded at the hire purchase price' 1' The profit is recogniEed in proportion of the amount collected' :' The gross profit and the interest income are not accounted for separately'
>ummar# of proce5ures /r HP /ebtors /r HP Sales
>ith the hire purchase price'
/r Aan? Cr HP /ebtors
>ith the deposit and instalments recei&ed
/r HP Sales Cr HP Trading
Transfer the HP Sales to HP Trading aFc
/r HP Trading Cr Pro&ision for UnrealiEed profit
>ith the increase in the pro&ision for unrealiEed profit' Transfer the unearned total profit ( unearned HP profit G unearned BP)
/r Pro&ision for UnrealiEed profit Cr HP trading
>ith the decrease in the pro&ision for unrealiEed profit' Transfer the unearned total profit (unearned HP profit G unearned BP)
Pro*ision or unrealied proit
= Total Profit . instalments not #et recei*e5 HP price
= ,HP price 7 Cost- . Instalments not #et recei*e5 HP price
Example 10
Example 10 " company selling on HP has the following details+ The gross profit on the sales is recogniEed on the basis of the cash recei&ed Sales &olume 1 units /ate of sale 0 an 0--7 Cash price ,01.. HP price ,1... Cost ,0... /own payment IL Instalments ,18.4 *uarterly 3irst due :0 #ar 0--7
Re%uired' &ccount prepared according to the ollowing assumptions' (a) &ll instalments were recei*ed or the years ended ,- Dec -../ and -..0 () &ll instalments were recei*ed or the years ended ,- Dec -../ and -..01 e2cept one in arrears as at ,- Dec -../ which was recei*ed in -..0
(a)
HP Price 1!!: Kan 1 HP >ales ,$2000.2-
HP 8etors $ 1!!: 8ec "1 aninstalment &000 ,$2;0.&.28ec "1 al c%5 &000
Pro*ision for unreali?e5 profit 1!!: $ 1!!: 8ec "1 al c%5 1000 8ec "1 HP Tra5ing ,$&0002000-.2000%&000
$ 2000 2000 &000
$ 1000
Tra5ing an5 profit an5 loss account for the #ear en5e5 ,Extract!: $ >ales ,HP priceess cost of goo5s sol5 essPro*ision for unrealise5 profit ross profit
$ &000 2000 1000 1000
alance >heet as at "1 8ec ,Extract!: Current Assets 2000 HP 8etors ess Pro*ision for unreaslise5 1000 profit 1000
(a)
HP Price 1!!: Kan 1 HP >ales ,$2000.2-
HP 8etors $ 1!!: 8ec "1 aninstalment &000 ,$2;0.&.28ec "1 al c%5 &000
1!!<
$ 2000 2000 &000
1!!<
Kan 1 al %5
2000 8ec "1 an instalment 2000 Pro*ision for unreali?e5 profit 1!!: $ 1!!: $ 1000 8ec "1 al c%5 1000 8ec "1 HP Tra5ing ,$&0002000-.2000%&000 1!!< $ 1!!< 8ec "1 HP Tra5ing 1000 8ec "1 al %5 8ec "1 al c%5 0 ,$&0002000-.0%&000
$ 1000
Tra5ing an5 profit an5 loss account for the #ear en5e5 ,Extract!: !< $ $ $ $ >ales ,HP price&000 A55 8ecrease in pro*3for unreali?e5 1000 profit 2000 ess cost of goo5s sol5 essIncrease Pro*ision for 1000 unreali?e5 profit 1000 ross profit alance >heet as at "1 8ec ,Extract!: $
Current Assets 2000 HP 8etors ess Pro*ision for unreali?e5 1000 profit
1000 !< $
()
HP Price 1!!: Kan 1 HP >ales ,$2000.2-
HP 8etors $ 1!!: 8ec "1 aninstalment &000 ,$2;0.&.22;08ec "1 al c%5 &000
Pro*ision for unreali?e5 profit 1!!: $ 1!!: 8ec "1 al c%5 112; 8ec "1 HP Tra5ing ,$&0002000-.22;0%&000
$ 1ales ,HP priceess cost of goo5s sol5 essPro*ision for unreali?e5 profit ross profit
$ &000 2000 112; 'heet as at "1 8ec ,Extract!: Current Assets 22;0 HP 8etors ess Pro*ision for unreali?e5 112; profit 112;
()
HP Price 1!!: Kan 1 HP >ales ,$2000.2-
HP 8etors $ 1!!: 8ec "1 aninstalment &000 ,$2;0.&.22;08ec "1 al c%5 &000
1!!<
$ 1ales ,HP price&000 A55 8ecrease in pro*3for unreasise5 112; profit 2000 ess cost of goo5s sol5 essIncreasePro*ision for 112; unrealise5 profit 'heet as at "1 8ec ,Extract!: $
Current Assets 22;0 HP 8etors ess Pro*ision for unreaslise5 112; profit
112; !< $
C3 A comination of the 2 metho5s The combination of 1 methods has the following characteristics+
0'The hire purchase sale is recorded at the cash price' 1'The profit is recogniEed in proportion of the amount collected' :'The gross profit and the interest income are accounted for separately' 9'Interest income is allocated o&er the period of the hire purchase agreement on a suitable basis
Summary of procedures /r HP debtors /r HP Sales
>ith the cash price'
/r Aan? Cr HP debtor
>ith the deposit recei&ed
/r Aan? Cr HP debtors Cr Interest recei&able
>ith the installments recei&ed' >ith the capital part of the installments' >ith the interest recei&able for the current period
/r HP trading Cr Pro&ision for UnrealiEed profit
>ith the increase in the pro&ision for unrealiEed profit' (@e&erse the entries for a decrease in the pro&ision for unrealiEed profit)
Pro*ision or unrealised proit 3 (Cash price 4 Cost ) 5 Instalments not yet recei*ed Cash Price
Example 11
Example 11 " company selling selling on HP has the following following details+ details+ The interest is accrued e&enly throughout the period of HP agreement The gross profit on the sales is recogniEed in the accounts on the basis of the amounts recei&ed Sales &olume 1 units /ate of sale 0 an 0--7 Cash price ,01.. HP price ,1... Cost ,0... /own payment IL Instalments ,18.4 *uarterly 3irst due :0 #ar 0--7
Interest per instalment = ,$20001200' = $100 Instalment = $2;0
=
Capital $1;0
Interest
$100
CashPrice 1!!: Kan 1 HP >ales ,$1200.2-
HP 8etors $ 1!!: 8ec "1 aninstalment 2&00 ,$2;0100-.&.2 8ec "1 al c%5
1200 1200
&000
&000
$
HP Interest )ecei*ale 1!!: 8ec "1 P%
$ '00
1!!: $ 8ec "1 an ,$1 ,$100 00. .&.2- '00 '00
Pro*ision for unreali?e5 profit 1!!: $ 1!!: 8ec "1 al c%5 200 8ec "1 HP Tra5ing ,$2&002000-.1200%2&00
$ 200
Tra5ing an5 profit an5 loss account for the #ear en5e5 ,Extract!: $ >ales ,cash priceess cost of goo5s sol5 essPro*ision for unrealise5 profit HP profit A55 Interest recei*e5
$ 2&00 2000 200 200 '00
alance >heet as at "1 8ec ,Extract!: Current Assets HP 8etors 1200
CashPrice 1!!: Kan 1 HP >ales ,$1200.2-
HP 8etors $ 1!!: 8ec "1 aninstalment 2&00 ,$2;0100-.&.2 8ec "1 al c%5
1200 1200
&000
&000
1!!< Kan 1 al %5
$
1!!< 1200
8ec "1 an instalment 1200
HP Interest )ecei*ale 1!!< 8ec "1 P%
$ '00
1!!< $ 8ec "1 an ,$100.&.2- '00
Pro*ision for unreali?e5 profit 1!!: $ 1!!: 8ec "1 al c%5 200 8ec "1 HP Tra5ing ,$2&002000-.1200%2&00 1!!< 8ec "1 HP Tra5ing
$ 200
1!!< 8ec "1 al %5
$ 200 $ 200
8ec "1 al c%5 0 ,$2&002000-.0%2&00 200
200
Tra5ing an5 profit an5 loss account for the #ear en5e5 ,Extract!: !< $ $ $ $ >ales ,cash price2&00 A55 8ecrease in pro*3for unreasise5 200 profit ess cost of goo5s sol5 essIncreasePro*ision for unrealise5 profit ross profit A55 Interest )ecei*e5
2000 200 200 '00
alance >heet as at "1 8ec ,Extract!: Current Assets HP 8etors
$ 1200
200 '00
!< $
)epossession
)epossession It may be happen that hire purchase debtors cannot ma?e all of the payments re*uired under the agreement' =nce the hire purchase debtor stops paying the instalments< the seller can ta?e away the goods' This is called repossession'
/r @epossession Cr HP Creditor
>ith the outstanding balance for the particular HP debtors
Interest suspense method
/r HP interest suspense Cr @epossession
>ith the HP interest not yet recei&ed
Profit suspense method
/r Pro&ision for unrealiEed profit Cr @epossession
>ith the outstanding pro&ision transferred
The combined method
/r @epossession Cr interest @ecei&able
>ith the amount of accrued HP interest
/r Trading Cr @epossession
>ith the &alue of the repossessed item which is ta?en bac? into stoc?
/r Aan? Cr @epossession
>ith the insurance claim or any sale proceeds for the repossessed item'
/r Profit and loss Cr @epossession
>ith the loss on the repossession (@e&erse the entries for a profit on
,he !alue of the repossessed item Cost = HP price
. (utstan5ing alance of the particular HP 5etor , repossesse5 items-
,a- sing interest suspense metho5
$2ample - (a) " company selling on HP has the following details+ The interest is accrued e&enly throughout the period of HP agreement The gross profit on the sales is recogniEed in the year of sales Sales &olume 1 units /ate of sale 0 an 0--7 Cash price ,01.. HP price ,1... Cost ,0... /own payment IL Instalments ,18.4 *uarterly 3irst due :0 #ar 0--7 "ll the instalments were recei&ed on the due dates< e6cept that payments on one of the items ha&e been default since :0 #ar 0--' The repossessed item has
1!!< Kan 1 al %5
HP 8etors $ 1!!< $ 2000 4ar "1 )epossession 1000 8ec "1 an instalment 1000
2000 HP interest suspense 1!!< $ 1!!< 4ar "1 )epossession &00 Kan 1 al %5 8ec "1 HP interest &00 recei*e5 Balue of '00 ,20001200-.&%'.1 )epossesse5 items )epossession 1!!< 4ar "1 HP 8etors
$ 1000
2000 $ '00 '00
1!!< $ 4ar "1 HP int3 suspense &00 ,$'00$&008ec "1 HP Tra5ing ;00 ,$1000.1000%20008ec "1 P%loss on repossession 100
,- sing profit suspense metho5
Example 12, " company selling on HP has the following details+ The gross profit on the sales is recogniEed on the basis of the cash recei&ed Sales &olume 1 units /ate of sale 0 an 0--7 Cash price ,01.. HP price ,1... Cost ,0... /own payment IL Instalments ,18.4 *uarterly 3irst due :0 #ar 0--7 "ll instalments were recei&ed on the due dates< e6cept that payments on one of the items ha&e been in default since :0 #ar 0--' The repossessed item has been ta?en bac? into stoc?'
HP 8etors $ 1!!< 2000 4ar "1 )epossession
1!!< Kan 1 al %5
8ec "1 an instalment 2000 Pro*ision for unrealise5 profit 1!!<
$
4ar "1 )epossession 8ec "1 HP Tra5ing
;00 ;00
8ec "1 al c%5 ,20001000-.0%2000
0
1!!< 4ar "1 HP 8etors
1!!< Kan 1 al %5
$ 1000 1000 2000 $ 1000
Balue of )epossesse5 items
'00 '00 )epossession $ 1!!< $ 1000 4ar "1 Pro*3 for unrealise5 ;00 profit ,20001000-.1000%2000 8ec "1 HP Tra5ing ;00 ,$1000.1000%2000-
1000
1000
,c- sing the comine5 metho5
$2ample -(c)
" company selling selling on HP has the following following details+ details+ The interest is accrued e&enly throughout the period of HP agreement The gross profit on the sales is recogniEed in the accounts on the basis of the amounts recei&ed Sales &olume 1 units /ate of sale 0 an 0--7 Cash price ,01.. HP price ,1... Cost ,0... /own payment IL Instalments ,18.4 *uarterly 3irst due :0 #ar 0--7
0'
1'
"ll the instalments instalments were recei&ed recei&ed on the due dates< dates< e6cept that payments on one of the item has been in default since :0 #ar 0-- The seller repossessed the goods on the same date (:0 #ar 0--)as that the HP debtor defaulted on the payment The seller repossessed the goods on :0 une 0--< after the HP debtor defaulted on the payment
(-) 1!!< Kan 1 al %5
1!!< 8ec "1 P%
HP 8etors $ 1!!< 1200 4ar "1 )epossession 8ec "1 an instalment ,$2;0100-.& 1200 Interest recei*ale $ 1!!< 8ec "1 an ,$100.&&00
)epossession
$ :00 :00 1200 $ &00
Balue of )epossesse5 items
1!!< $ 4ar "1 HP 8etors :00 $1200,2;0100-.&
1!!< $ 8ec "1 HP Tra5ing ;00 ,$1000.1000%12008ec "1 P%loss on repossession 100
:00
:00
() 1!!< Kan 1 al %5
1!!< 8ec "1 P%
HP 8etors $ 1!!< $ 1200 Kune"0 )epossession :00 8ec "1 an instalment :00 ,$2;0100-.& 1200 1200 Interest recei*ale $ 1!!< $ Kune "0 )epossession 200 :00 ,$100.28ec "1 an ,$100.&&00 Balue of :00 :00 )epossession
1!!< $ Kune "0 HP 8etors :00 $1200,2;0100-.& Kune "0 Interest 200 recei*ale :00
)epossesse5 items
1!!< $ 8ec "1 HP Tra5ing ;00 ,$1000.1000%12008ec "1 P%loss on repossession "00 :00
Hire Purchase Tra5ing an5 Profit an5 loss account
Interest suspense metho5 an5 the comine5 metho5 Hire Purchase Tra5ing
Purchase A55 )epossession ess closing stoc Cost of oo5s sol5 ross profit
$ x
$ >ales 7 cash price
x
x x x x x x
x
Profit an5 oss ,Extractoss on )epossession
$ x
HP profit HP interest Profit on )epossession
$ x x x
Profit suspense metho5 Hire Purchase Tra5ing Purchase A55 )epossession ess closing stoc Cost of oo5s sol5 Pro*ision for nreali?e5 profit ross profit
$ x x x x x x x x
$ >ales 7 HP price
x
x
Profit an5 oss ,Extractoss on )epossession
$ x
HP profit Profit on )epossession
$ x x
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