Bhalotia Classes (9883034569): Accounts crash course @ 1000

5. Hire Purchase: H.P Trading Method

Bright star Ltd sold goods on hire purchase system making profit 33 1/3 % on sales. From the following
particulars prepare Hire purchase trading account:
1.1.2020:
Stock with customers at hire purchase price 45,000
Shop Stock 90,000
Installment Due 25,000
31.12.2021:
Cash received from customers 3,00,000
2,500
Instalment Due 45,000
Shop Stock (excluding repossessed stock) 1,00,000
Goods purchased during the year 3,00,000
Solution:
Dr. Bright Star Ltd. Cr.
Hire Purchase Trding Account for the year ended 31.12.21
Particulars Amount Particulars Amount
Rs. Rs.
To Balance b/f By (OP) H.P Stock Reserve A/c 15,000
Hire Purchase Stock (at H.P. price) 45,000 45,000
Hire Purchase Debtors 25,000 3,00,000
By Cash A/c
To Goods sold on Hire Purchase A/c 4,35,000
By Goods sold on Hire Purchase A/c
(At H.P. Price) (see working note) 1,45,000
4,35,000
To Loss on Repossessed Goods A/c 7,500
– By Repossessed Goods A/c 10,000
To (closing) H.P. Stock Reserve A/c 50,000 (Instalments Unpaid)
By Balance c/f:
1,50,000
By Hire Purchase Stock (H.P. Price) 1,50,000
1,02,500 By Hire Purchase Debtors 45,000
To Profit & Loss A/c (balancing fig)
6,65,000 6,65,000
Working Notes:
Dr. Memorandum Shop Stock Account Cr.
Particulars Amount Particulars Amount
Rs. Rs.
To Balance b/f 90,000 By Goods Sold on Hire Purchase A/c 2,90,000
To Purchase A/c 3,00,000 (At cost – Balancing Figure)
By Balance c/f 1,00,000
3,90,000 3,90,000

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Dr. Memorandum Hire Purchase Stock Account Cr.
Particulars Amount Particulars Amount
Rs. Rs.
To Balance b/f (H.P. Price) 45,000 By H.P. Debtors A/c (Transfer 3,30,000
To Goods Sold on Hire Purchase A/c 4,35,000 from H.P Debtors Account)
[H.P. Price = 2,90,000+ of 2,90,000] By Balance c/d (at H.P. Price) 1,50,000
(Balancing figure)
4,80,000 4,80,000

Dr. Memorandum Hire Purchase Debtors Accounnt Cr.

Particulars Amount Particulars Amount
To Balance b/f 25,000 By Cash A/c 3,00,000
To H.P Stock A/c (Balancing 3,30,000 By Goods Repossessed A/c 10,000
Figure) By Balance c/f 45,000
3,55,000 3,55,000

6. Hire Purchase: Stock & Debtors Method

Decor Ltd. supply goods on hire purchase system at a profit of 50% over the cost. The following are the
transactions for the year ending December 31, 2021:

Stock out on hire at cost on 01/01/2021 60,000

on 31/12/2021 48,000
Instalments Due (customers still paying)
On 01/01/2021 5,400
On 31/12/2021 9,000
Goods Repossessed during the year
450
Instalments realised during the year 1,17,000
Prepare the Hire-Purchase Stock A/c, Hire-Purchase Debtors' A/c and the Hire-Purchase Adjustment A/c.

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Bhalotia Classes (9883034569): Accounts crash course @ 1000
Solution:
Books of Décor Ltd.
Dr. Hire Purchase Stock Account Cr.
Date Particulars Amount Date Particulars Amount
Rs. Rs.
1.1.21 To Balance b/f 90,000 31.12.21 By Hire Purchase Debtors 1,21,500
[Rs. 60,000 + 50 % ] A/c (Instalments matured)
31.12.21 To Goods Sent on Hire (from H.P Debtors A/c)
Purchase A/c (H.P. Price) 1,03,500 31.12.21 By Balance c/f 72,000
(Balancing Figure) [48,000 + 50 %]
1,93,500 1,93,500

Dr. Hire Purchase Debtors Account Cr.

Date Particulars Amount Date Particulars Amount
Rs. Rs.
1.1.21 To Balance b/f 5,400 31.12.21 By Bank A/c (instalments 1,17,000
(Opening Instalments Due) collection)
31.12.21 To Hire Purchase Stock A/c 1,21,500 31.12.21 By Repossessed Stock A/c 900
(Balance Figure) (Unpaid instalments)
31.12.21 By Balance c/f 9,000
(Closing Instalments Due)
1,26,900 1,26,900

Dr. Hire Purchase Adjustment Account Cr.

Date Particulars Amount Date Particulars Amount
Rs. Rs.
31.12.21 To Balance c/f 24,000 1.1.21 By Balance b/f 30,000
[Closing H.P. Stock [Opening H.P. Stock
Reserve] [72,000 x 1/3) Reserve] (90,000 x 1/3)
31.12.21 To Loss on Repossessed 450 31.12.21 By Goods sent on Hire
Stock (900 – 450) Purchase A/c 34,500
31.12.21 To Profit & Loss A/c 40,050 [1/3 of Rs. 1,03,500]
(Balance Figure)
64,500 64,500
Working Notes:
Loading on cost = 50 % hence Loading on H.P. Price = 50/150 = 1/3

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