Archive for December, 2007

Accounting For Hire Purchase In The Purchaser’s Book

This article deals the Accounting treatment of Hire Purchase Agreement of Purchaser:
In the Purchaser’s Books

Goods on hire purchase are treated as Assets upon receipt. The cash price is recorded as Cost of Assets re: Fixed Assets and

The interests on hire purchase are charge to the Profit & Loss account as revenue expenditure over the period [...]

December 12, 2007  Tags: Hire Purchase, Hire purchase accounting  Posted in: Hire Purchase  3 Comments

Hire Purchase, Credit Sales And Rental Agreement

This article deals with the features of Hire Purchase and the differentiation between Hire Purchase, Credit Sale and Rental Agreement:-
Features of Hire Purchase
When goods are purchased under a Hire Purchase Agreement:

Vendor of the goods leases the asset to the purchaser on the terms that the purchaser shall pay to the vendor hire charges equivalent to [...]

December 12, 2007  Tags: Credit sales, Hire Purchase, Rental  Posted in: Hire Purchase  One Comment

Short Term Decision Making-Special Order(Part5)

Sometimes, when a company has spare production capacity, it is willing to fulfill SPECIAL ORDERS for non-regular customers. Normally, the prices quoted are lower than those regular customers.

So when do a Company Accept or Reject a Special Order?

Generally, the rule is to accept the order as long as the incremental revenue is MORE [...]

December 11, 2007   Posted in: Short Term Decision Making  No Comments

Short Term Decision Making:Make Or Buy (Part4)

At times, management needs to decide whether to manufacture the product or to buy the ready made from other companies.

The following are some reasons to buy from other companies:

Flexibility to meet urgent demand of customers;
Overcome limiting factor problem ( Part 3);
Concentrate [...]

December 11, 2007   Posted in: Short Term Decision Making  No Comments

Short Term Decision-Limiting Factor(Part3)

As a result of limited supply of resources constraint, a company normally cannot produces as many products as it wish.
The limited supply of resources can be in many forms like limited cash, labor time, material/machine availability and others.
In line with the limited resources, the production manager therefore needs to plan the production mix in order [...]

December 11, 2007   Posted in: Short Term Decision Making  No Comments

Short Term Decision Making: Other Relevant Cost Techniques(Part2)

The following are some other cost techniques which are useful to management’s decision making:

Opportunity Cost

Represents the opportunities which have been forgone by following one course of action rather than an alternative course.
The opportunity cost in this case is the [...]

December 11, 2007   Posted in: Short Term Decision Making  No Comments

Short Term Decision Making: Understand Relevant Costs(Part1)

It is important that Management needs to have sufficient and relevant information to make the correct decisions. Hence, the need to understand relevant costs.

What really is Relevant cost?

A relevant cost relates to future expected costs that will differ with each alternative used.
Because [...]

December 11, 2007   Posted in: Short Term Decision Making  No Comments


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