Hire Purchase

Dear Students

Can anyone explain with Numerical examples the adjustments to be carried out ,Disclosure and what these terms actually mean in a Hire Purchase Transaction?

1.Instalments Due

2.Instalments Not Due

3.Hire Purchase Stock Reserve

 

Thanks in advance

Replies (3)

Hi Mr.Sivaram

I will explain instalment due, instalment not due, stock reserve

Baisics:

Generally in hirepurchase we make a sale and collects the sale amount periodically (fixed time) along with interest. Ownership of goods will be trnsfd only at the end of the last instalment

 

Instalment Due:

It is similar to Sundry debtors. As on reporting date, instalment due represents amount payable by hire purchaser. So instalment due account should show the due amount with contains both principal + interest

Instalment not Due:

It is similar to Closing Stock. As on reporting date, instalment not due represents amount payable by hire purchaer but it is not due on reporting date. So instalment due account should treated as similar to closing stock.
So we should value the instalment not due account at principal i.e not including the interest component.


So as on reporting date interest portion of Instalment not Due account shoule be trnsfd to HP Stock Reserve account.

 

HP Stock resevere is an account similar to trading account of normal business. At the time of HP Sale diff between HP Sale Price & Cash price which represents interest will be parked in HP Stock Reserve. At the end of financial year, the interest component on instalment not due account will be trnsfd from that account to HP Stock Reserve.

Thanks a lot Mr Ramanan Krishnamoorthy -Wonderful explanation you have given Simply i can say Beautiful and thanks for making me to digest this adjustment

Hi All,

I am trying to do a problem based on the above concept. Please help me in that.

Extract from Balance sheet( S Ltd acquiring T ltd. COnsolidated Financial Statement to be prepared.

Assets S Ltd T Ltd
Plant and Machinery 2,40,000 135,000
Stock 1,20,000 36,400
Sundry Debtors 44,000 40,000
Bills Receivable 15,800 -

Instalments due- Rs.5,000

Instalments not due- Rs.2,000

HP Stock Reserve-Rs.400

In solution of this problem, intercompany adjustments have been done under following heads-

1. Intercompany Owings (Debtors and creditors)

2. Stock

3. Plant and Machinery

Can anyone please help me in -

a- What adjustments should be done under above heads for Hire purchase.

b- Reasons for those adjustments

Regards,

Prachi

 

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
23 October 2026
Sr. Accountant

SANKARAN & KRISHNAN

New Delhi

B.Com

View Details
Company
Featured 03 October 2026
Accountant

A P Lodha and Associates

Jalna

B.Com

View Details
Company
ARTICLESHIP 08 October 2026
ARTICLE TRAINEE

S.B.G. & CO. CHARTERED ACCOUNTANTS

New Delhi

CA Inter

View Details
Company
06 October 2026
Assistant Manager - Audit and Compliance

Ravi K Jain & Co

Noida

Others

View Details
Company
15 October 2026
Senior Accountant

Continental Belting Pvt Ltd

Mumbai

B.Com

View Details
Company
10 October 2026
Accounts Associate Level 1

Abic and Mani Chartered Accountants

Kottayam

B.Com

View Details
Company
08 October 2026
Account Executive

Elite Taxation

New Delhi

CA Foundation

View Details
Company
30 September 2026
Senior Accounts Executive

Codeboard Technology

Chennai

MBA

View Details