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Hire Purchase & Installment - Coggle Diagram
Hire Purchase &
Installment
Hire Purchase
Nature
Ownership is with vendors
Installment = charges for asset
vendor has the right to take back the asset
Features
Possession
Installment
Down payment
Constituents (interest + capital)
Ownership
repossession
Terms
Hire vendor
Hire purchaser
cash price
Downpayment
Hp installment
HP price
Reposession
Complete repossesion
partial reposseion
Accounting
Calculations
calculating
total cash price
With annuity table
Down payment + pv of installment
Annual payment x annuity
Formula
Without annuity table
Last installment
Find ratio of interest
Separate interest from installment
add that into previous installment
Repeat
calculation of interest
cash price :check:
Amount of installment :check:
Interest rate :check:
Cash price :check:
Amount of installement :check:
interest rate :red_cross:
Accounting
Books of
HP
Cash price
Full cp is Dr to assest a/c
Interest suspense
Books of
HV
Cash sales
Inerest suspense
Installment
Features
possessions transfers immediately
sellers cant take back the asset but can file a suit
Accounting
Book of buyer
Book of seller