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Hire purchase

Shobhit Jain (CA) (4896 Points)

07 December 2017

What is treatment hire Installment not due while preparing financials?

How Installment not due is disclosed in the balance sheet in books of hire purchaser and seller?

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6 Replies

Damisetty Saketh (student) (108 Points)
Replied 07 December 2017

For Hire Purchaser-Liability,For Hire Seller-Asset.

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Damisetty Saketh (student) (108 Points)
Replied 07 December 2017

sorry I think there will be no effect in hire purchaser books.It will be recorded only in hire vendor books.I think that installment amount will be treated as closing stock in books of hire vendor.

Shobhit Jain (CA) (4896 Points)
Replied 07 December 2017

Originally posted by : Damisetty Saketh
	sorry I think there will be no effect in hire purchaser books.It will be recorded only in hire vendor books.I think that installment amount will be treated as closing stock in books of hire vendor.

Can you please explain why there will not be any treatment in hire purchaser book?

Damisetty Saketh (student) (108 Points)
Replied 07 December 2017

Because installment is not due,So I think there is No obligation of hire purchaser.(Due means didn't reached date of payment).

Shobhit Jain (CA) (4896 Points)
Replied 07 December 2017

Originally posted by : Damisetty Saketh
	Because installment is not due,So I think there is No obligation of hire purchaser.(Due means didn't reached date of payment).

So there will be no application of principle of prudence?

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Damisetty Saketh (student) (108 Points)
Replied 07 December 2017

I think prudence concept doesn't require in this case because if installment is not paid automatically contract will be cancelled and hire vendor will take over asset and also hire purchaser too don't lose any thing because he too used the asset for some period.

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