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
| Example to illustrate the Sum Of Digit or Rule of 78 method to apportion hire purchase interest. Under a hire purchase agreement,the company bought an air-conditioner with a cash purchase price of $3,500. A deposit of $500 is paid and 12 annual installments of $300 being agreed.
The installments are numbered as follows:
The total hire purchase interest of $600.00 is apportioned based on above weight:
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- How To Apportion Hire Purchase Interest-Reducing Balance Method (Part 1 of 3)
- How To Apportion Hire Purchase Interest-Straight Line Method (Part 2 of 3)
- Hire Purchase,Credit Sales And Rental Agreement
- Performance of Companies Listed in Bursa Saham Malaysia from 2007 to July 2009
- 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
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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