Archive for the ‘Hire Purchase’ Category

How To Apportion Hire Purchase Interest-Using Sum Of Digit Method Or Rule Of 78 (Part 3 of 3)

Hire purchase interest are apportioned based on the reducing balance method (part 1) and on Straight line basis(part 2).
This final part 3 looks at another commonly used method to apportion hire purchase interest namely the Sum of digit method of Rule of 78 

December 1, 2009  Tags: hire purchase interest, interest apportioned, rule of 78, sum of digit  Posted in: Hire Purchase  No Comments

How To Apportion Hire Purchase Interest-Straight Line Method (Part 2 of 3)

Part 1 shows the reducing balance method . 
This article looks at how the hire purchase interest is apportioned over the period of the agreement using the Straight Line method. 

November 30, 2009  Tags: apportion interest, hire purchase interest  Posted in: Hire Purchase  No Comments

How To Apportion Hire Purchase Interest-Reducing Balance Method (Part 1 of 3)

Note that the hire purchase interest needs to be apportioned over the period of the agreement. The commonly used methods are the Reducing Balance method, Straight Line method and Sum of Digits or Rule of 78 method 
Below example illustrate the Reducing Balance method to apportion hire purchase interest:- 

November 30, 2009  Tags: apportion interest, hire purchase interest  Posted in: Hire Purchase  No Comments

Difference Between Hire Purchase And Installment System

For those unfamiliar between Hire Purchase and Installment System, tabulated below in summary some of the differences:

Hire Purchase

Installment System

Is an agreement of hiring

Is an agreement of outright purchase

Property in goods or the ownership remains with hire vendor until the last installment is paid by the purchaser.

The title to goods passes to the buyer immediately [...]

July 3, 2008  Tags: Hire Purchase  Posted in: Hire Purchase  No Comments

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


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