Hire Purchase

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Shammi_Vision (Querist)
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13 March 2010 I am confused in Hire Purchase.
I could not understand the treatment of Instalment Due, Not due and not yet due etc.
Plz help me on this topic.
plz send me your notes on my e-mail id. saifisahab@gmail.com

I will be so much Thankfull.

Thanks
Shammi

shakuntala chhangani

shakuntala chhangani (Expert)
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23 March 2010 Hi Shammi, take a simple ex. Godds worth Rs. 1,00,000 sold on Hpp at 20% above cost therefore the selling price will be Rs. 1,20,000.So the entry is :
HP Trading A/c Dr. 1,20,000
To goods sent on HP A/c 1,20,000
now there are to possibilities :
either it is due for payment (will be considered as sales and hence cr. to HP Trading A/c)) or not yet due for payment (will be considered as Closing stock).
If it is due for payment there are three possibilities :
either the customer pays it e.g.Rs. 80,000
Customer defaults for Rs. 10,000 for which goods will be repossessed.
further Rs. 10,000 is due for payment and the customer has not paid it but will pay it in future so it will be recognised as debtor. So the entry will be :
Cash/ Bank A/c Dr. 80,000
Repossessed stock A/c Dr. 10,000
HP Debtors A/c Dr. 10,000
To HP Trading A/c 1,00,000
Now let us take the remaining part that the instalments not yet due, say out of above Rs. 3,000 is due from the defaulting customer then it need to be cancelled and cl. st. will be remaining Rs. 17,000 (1,20,000 -1,00,000-3,000), and the entry will be :
Repossessed stock A/c dr. 3,000
HP Stock A/c Dr. 17,000
To HP Trading A/c 20,000
so if u do not reverse loading ur hp trading a/c tallies. Keep in mind that loading of stock is reversed but loading of sales is not reversed. therefore u will hv to reverse loading of op. stock and goods sent on consignment from dr. side and repossessed stock and closing stock from cr. side. The balancing figure is ur profit or loss. In case u hv any further doubt, revert back to me. Regards, Ca Shakuntala Chhangani