Hire-purchase by a holding co.

A holding co. purchases some machinery from its subs. on hire-purchase basis...

While consolidation, Installments due by it and not due are all adjusted to the creditors of the subsidary...

Instal. due are adj to the debtors of the hold. co.

Where are the installments not due to be adjusted in the holding co.'s accounts.......is it made to the stock or to the machinery a/c..?

Also will it be fair/correct to record the machinery purchased to Stock a/c first and later on complete payment of installments transfer it to Machinery a/c..?

Replies (5)

Its been 2 days since i posted this query........can no one solve this for me/..??

when machinery is purchased on hire purchase basis. buyer co debits the machinery a/c and credits the seller with full value that is installment due and not due so installment due+not due should be deducted from the creditors

the Seller recognises the debtors to the extent of intalment due so installment sue should be deducted from the debtors.

and the installment not yet due is included in the value of the stock of seller so that is deducted from the stock and the profit on that part (stock reserve) is deducted from the stock.

Now the machinery is within the group so unrealised profit on the total value of machinery is deducted from the value of machine and deducted from the seller co profits

Where as in the material  the unrealised profit of holding co. is adjusted to its stock a/c

 

And not the machinery a/c 

I wanna know whether any kind of such treatment is possible...?

No unrealised profit on machinery should be deducted from the machine a/c only.

If the company is dealing in machine i.e. it is treated as its purchases and not the assets then only it is adjusted against the stock

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ok thank you.

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