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.
Example to illustrate the Straight line method to apportion hire purchase interest. Under a hire purchase agreement,the company bought an air-conditioner with a cash purchase price of $2,500. A deposit of $500 is paid and 24 annual installments of $100 being agreed.
Hire Purchase MONTHLY interest is apportioned as follows:-
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- How To Apportion Hire Purchase Interest-Reducing Balance Method (Part 1 of 3)
- How To Apportion Hire Purchase Interest-Using Sum Of Digit Method Or Rule Of 78 (Part 3 of 3)
- Hire Purchase,Credit Sales And Rental Agreement
- Accounting For Hire Purchase In The Purchaser’s Book
- Medium Term Financing- Hire Purchase and Leasing Facility (Part 1)
- Difference Between Hire Purchase And Installment System
- FX Foreign Exchange Strategies:Internal Hedging Method (Part 3 of 4)
FCCA,CA(MIA)with more than 26 years of post-qualifying working experiences. Previous working stints with one of the big accounting four,Regional GFC & Group Treasurer in a group of Malaysian and Group CFO in Singapore public listed concern.Also author to another very popular free educational accounting cum finance blog:http://basiccollegeaccounting.com under the branding of College Accounting Coach.
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