The document discusses the concept of hire purchase system. Under this system, ownership of the goods remains with the vendor until the buyer pays the final installment. The buyer acquires possession of the goods by agreeing to pay installments over a fixed period. If the buyer defaults, the vendor can repossess the goods and any amounts already paid are forfeited. The document also compares hire purchase system to installment payment system in terms of ownership, risks, right to return goods, and more.

1. Part iv: Hire Purchase Accounts M.COM FINAL
Arshad Islam; Contact No: 0092-313-9911865; E-Mail: Arshad_mccm@yahoo.com Page 1
Concept of Hire Purchase System:
Purchase and sale of goods under a hire purchase system is different from cash sale and credit
sale. In case of cash sale, the buyer pays the lump sum to the seller and immediately
ownership is passed along with the goods. While in credit sale the payment is made in future.
In these both cases the ownership and possession of goods pass on the buyer. However, hire
purchase system is a special system of purchase and sale.
In hire purchase system, the buyer acquires the property by promising to pay necessary
installment payment of monthly, quarterly, half yearly or any other period. The period of
payment has to be fixed while, signing the hire sell agreement. Though, the buyer acquires
the asset under hire purchase system after signing the agreement, the title of ownership
remains with vendor until the buyer squares up his/her entire liability. When the buyer pays
the final installment and any other obligation according to hire purchase agreement, only then
the title of ownership of the goods would be transferred to hire purchaser. If the hirer (hire
purchaser) makes default in the payment of any installment, the hire vendor has the right to
re-possess the goods. When the vendor re-possesses the goods due to the default of payment
of installment, in this case the amount already paid so far by the hirer will be forfeited.
The hire purchase price of goods is normally higher than the cash down price of article
because it includes interest as well as cash price. Under hire purchase system, the vendor is
responsible to repair the goods which are in the possession of buyer provided that the buyer
takes the utmost proper care of the goods acquired. The risk is also borne by the vendor until
the payment of last installment. The buyer has the right to return the goods to the vendor, if
they are not according to the terms and condition of hire purchase agreement.
Difference betweenHire Purchase systemand Installment Payment System
Differences Hire Purchase System Installment Payment system
1. Nature of Contract: It is a hiring goods agreement. It is an agreement of sale.
2. Ownership Ownership of goods is transferred after the
payment of final installment.
Ownership of thegoods passes to the
buyer just signing the agreement.
3. Right The buyer cannot sell, destroy or transfer the
goods.
The buyer can sell, destroy or mortgage
or transfer as his/her wish.
4. Risk All the risks are borne by thevendor before the
payment of final installment.
All the risks are to be borne by the
buyer from thedate of agreement.
5. Right Of Return The buyer can return the goods before making the
final installment.
The buyer cannot return thegoods to
the seller.
6. Repair and Maintenance The liability of repair and maintenance lies with
the seller provided that the buyer takes the utmost
good care.
The buyer is responsible for repair and
maintenance.
7. Forfeiture of Installment Paid In case of default in payment of installment, paid
installment will be forfeited and treated as hire
charges.
The act of forfeiture cannot be
activated.

2. Part iv: Hire Purchase Accounts M.COM FINAL
Arshad Islam; Contact No: 0092-313-9911865; E-Mail: Arshad_mccm@yahoo.com Page 2
Q 1: Solution:
Working Notes:
Analytical Interest Table
Year Particulars Payment Interest Principle amount Balance
1-1-99 Cash price 10000
1-1-99 Downpayment 4000 4000 6000
31-12-99 1st installment
(6000*5/100)
2300 300 2000 4000
31-12-
2000
2nd
installment
(4000*5/100)
2200 200 2000 2000
31-12-
2001
3rd
installment
(2000*5/100)
2100 100 2000 0
Total 10600 600 10000 NIL
Depreciationcalculation:
10000 * 5 / 100 = Rs 500 PA (Straight line method)
(A) In the books of Sharda (Hire Purchaser)
Journal
Date Particulars Ref. Debit (Rs) Credit (Rs)
1-1-1999 Machine A/C
To KusumA/C
(Purchase machine onHire purchase system)
10000
10000
1-1-1999 KusumA/C
To Cash& BankA/C
(Downpaymentpaid)
4000
4000
31-12-1999 DepreciationA/C
To Machine A/C
(Depreciationforone yearrecorded)
500
500
31-12-1999 InterestA/C
To KusumA/C
(interestdue forone year)
300
300
31-12-1999 KusumA/C
To Cash& BankA/C
(Firstinstallmentpaid)
2300
2300
31-12-1999 Profit& Loss A/C
To DepreciationA/C
To InterestA/C
(Expensesforthe yeartransferredtoProfit&LossA/C)
800
500
300
31-12-2000 Depreciation A/C
To Machine A/C
(Depreciationforone yearrecorded)
500
500
31-12-2000 InterestA/C 200

3. Part iv: Hire Purchase Accounts M.COM FINAL
Arshad Islam; Contact No: 0092-313-9911865; E-Mail: Arshad_mccm@yahoo.com Page 3
In the books of Sharda (Hire Purchaser)
Ledger Accounts
(1) Machine Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
1-1-1999 To KusumA/C 10000 31-12-1999 By DepreciationA/C
By Balance c/d
500
9500
10000 10000
1-1-2000 To Balance b/d 9500 31-12-2000 By DepreciationA/C
By Balance c/d
500
9000
9500 9500
1-1-2001 To Balance b/d 9000 31-12-2001 By DepreciationA/C
By Balance c/d
500
8500
9000 9000
1-1-2002 To Balance b/d 8500
To KusumA/C
(interestdue forone year)
200
31-12-2000 KusumA/C
To Cash& BankA/C
(second installmentpaid)
2200
2200
31-12-2000 Profit& Loss A/C
To DepreciationA/C
To InterestA/C
(Expensesforthe yeartransferredtoProfit&LossA/C)
700
500
200
31-12-2001 DepreciationA/C
To Machine A/C
(Depreciationforone yearrecorded)
500
500
31-12-2001 InterestA/C
To KusumA/C
(interestdue forone year)
100
100
31-12-2001 KusumA/C
To Cash& BankA/C
(thirdinstallmentpaid)
2100
2100
31-12-2001 Profit& Loss A/C
To DepreciationA/C
To InterestA/C
(Expensesforthe yeartransferredto Profit&LossA/C)
600
500
100

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(2) Kusum (Hire Vender) Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
1-1-1999
31-12-1999
To Cash & Bank A/C
To Cash & Bank A/C
To Balance c/d
4000
2300
4000
1-1-1999
31-12-1999
By Machine A/C
By InterestA/C
10000
300
10300 10300
31-12-2000 To Cash & Bank A/C
To Balance c/d
2200
2000
1-1-2000
31-12-2000
By Balance b/d
By InterestA/C
4000
200
4200 4200
31-12-2001 To Cash & Bank A/C 2100 1-1-2001
31-12-2001
By Balance b/d
By InterestA/C
2000
100
2100 2100
(3) Interest Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
31-12-1999 To KusumA/C 300 31-12-1999 By Profit& Loss A/C 300
300 300
31-12-2000 To KusumA/C 200 31-12-2000 By Profit& Loss A/C 200
200 200
31-12-2001 To KusumA/C 100 31-12-2001 By Profit& Loss A/C 100
100 100
(B) In the books of Kusum (Hire Vendor)
Journal
Date Particulars Ref. Debit (Rs) Credit (Rs)
1-1-1999 Sharda A/C
To Hire Purchase SalesA/C
(Soldmachine onHire purchase system)
10000
10000
1-1-1999 Cash & Bank A/C
To ShardaA/C
(Downpayment Received)
4000
4000
31-12-1999 Sharda A/C
To Interest A/C
(interestdue forone year)
300
300
31-12-1999 Cash & Bank A/C
To ShardaA/C
(FirstinstallmentReceived)
2300
2300
31-12-1999 InterestA/C
To Profit& Loss A/C
(income forthe yeartransferredtoProfit& LossA/C)
300
300
31-12-1999 Hire purchase Sales A/C
To TradingA/C
(SalestransferredtotradingA/C)
10000
10000

5. Part iv: Hire Purchase Accounts M.COM FINAL
Arshad Islam; Contact No: 0092-313-9911865; E-Mail: Arshad_mccm@yahoo.com Page 5
In the books of Kusum (Hire Vendor)
Ledger Accounts
(1) Sharda (Hire Purchaser)Account
(2) Interest Account
Date Particulars
Amount
(Rs)
Date Particulars
Amount
(Rs)
31-12-1999 To Profit& Loss A/C 300 31-12-1999 By Sharda A/C 300
300 300
31-12-2000 To Profit& Loss A/C 200 31-12-2000 By Sharda A/C 200
200 200
31-12-2001 To Profit& Loss A/C 100 31-12-2001 By Sharda A/C 100
100 100
31-12-2000 Sharda A/C
To Interest A/C
(interestdue forone year)
200
200
31-12-2000 Cash & Bank A/C
To ShardaA/C
(second installmentReceived)
2200
2200
31-12-2000 InterestA/C
To Profit& Loss A/C
(income forthe yeartransferredtoProfit& Loss A/C)
200
200
31-12-2001 Sharda A/C
To Interest A/C
(interestdue forone year)
100
100
31-12-2001 Cash & Bank A/C
To ShardaA/C
(thirdinstallmentReceived)
2100
2100
31-12-2001 InterestA/C
To Profit& Loss A/C
(income forthe yeartransferredtoProfit& LossA/C)
100
100
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
1-1-1999
31-12-1999
To HP SalesA/C
To InterestA/C
10000
300
1-1-1999
31-12-1999
By Cash & Bank A/C
By Cash & Bank A/C
By Balance c/d
4000
2300
4000
10300 10300
1-1-2000
31-12-2000
To Balance b/d
To InterestA/C
4000
200
31-12-2000
31-12-2000
By Cash & Bank A/C
By Balance c/d
2200
2000
4200 4200
1-1-2001
31-12-2001
To Balance b/d
To InterestA/C
2000
100
31-12-2001 By Cash & Bank A/C 2100
2100 2100

6. Part iv: Hire Purchase Accounts M.COM FINAL
Arshad Islam; Contact No: 0092-313-9911865; E-Mail: Arshad_mccm@yahoo.com Page 6
Q 2: Solution:
Working Notes:
Analytical Interest Table
Year Particulars Payment Interest Principle amount Balance
1-4-1998 Cash price 20000
1-4-1998 Downpayment 5000 5000 15000
31-12-
1998
1st installment
(15000 *5/100 * 9 / 12)
5563 563 5000 10000
31-12-
1999
2nd
installment
(10000*5/100)
5500 500 5000 5000
31-12-
2000
3rd
installment
(5000*5/100)
5250 250 5000 0
Total 21313 1313 20000 NIL
Depreciationcalculation:
20000 * 10 / 100 = Rs 2000 PA (Original cost method)
2000 * 9 / 12 = Rs 1500 (for first year)
In the books of “A” (Hire Purchaser)
Ledger Accounts
(1) Machine Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
1-4-1998 To A A/C 20000 31-12-1998 By DepreciationA/C
By Balance c/d
1500
18500
20000 20000
1-1-1999 To Balance b/d 18500 31-12-1999 By DepreciationA/C
By Balance c/d
2000
16500
18500 18500
1-1-2000 To Balance b/d 16500 31-12-2000 By DepreciationA/C
By Balance c/d
2000
14500
16500 16500
1-1-2001 To Balance b/d 14500

7. Part iv: Hire Purchase Accounts M.COM FINAL
Arshad Islam; Contact No: 0092-313-9911865; E-Mail: Arshad_mccm@yahoo.com Page 7
(2) “B” (Hire Vender) Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
1-4-1998
31-12-1998
To Cash & Bank A/C
To Cash & Bank A/C
To Balance c/d
5000
5563
10000
1-4-1998
31-12-1998
By Machine A/C
By InterestA/C
20000
563
20563 20563
31-12-1999 To Cash & Bank A/C
To Balance c/d
5500
5000
1-1-1999
31-12-1999
By Balance b/d
By InterestA/C
10000
500
10500 10500
31-12-2000 To Cash & Bank A/C 5250 1-1-2000
31-12-2000
By Balance b/d
By InterestA/C
5000
250
5250 5250
(3) Interest Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
31-12-1998 To “B” A/C 563 31-12-1998 By Profit& Loss A/C 563
563 563
31-12-1999 To “B” A/C 500 31-12-1999 By Profit& Loss A/C 500
500 500
31-12-2000 To “B” A/C 250 31-12-2000 By Profit& Loss A/C 250
250 250
Q 3: Solution:
Working Notes:
Analytical Interest Table
Year Particulars Payment Interest Principle amount Balance
1-1-1996 Cash price (1500 * 5) 7500
1-1-1996 Downpayment(200 * 5) 1000 1000 6500
31-12-
1996
1st installment(300* 5)
(6500 * 5 / 100)
1500 325 1175 5325
31-12-
1997
2nd
installment
(5325 * 5 / 100)
1500 266 1234 4091
31-12-
1998
3rd
installment
(4091 * 5 / 100)
1500 205 1295 2796
31-12-
1999
4th
installment
(2796 * 5/100)
1500 140 1360 1436
31-12-
2000
5th
installment
(1500 – 1436)
1500 64 1436 0
Total 8500 1000 7500 NIL

8. Part iv: Hire Purchase Accounts M.COM FINAL
Arshad Islam; Contact No: 0092-313-9911865; E-Mail: Arshad_mccm@yahoo.com Page 8
Depreciationcalculation:
Year Beginning balance (Rs) Depreciation (Rs) Ending balance (Rs)
1996 7500 (7500*10/100) = 750 (7500 – 750) = 6750
1997 6750 (6750*10/100) = 675 (6750 – 675) = 6075
1998 6075 (6075*10/100) = 608 (6075 – 608) = 5467
1999 5467 (5467*10/100) = 548 (5467 – 548) = 4919
2000 4919 (4919*10/100) = 492 (4919 – 492) = 4427
In the books of Sun Co Ltd (Hire Purchaser)
Ledger Accounts
(1) Machine Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
1-1-1996 To Star Co Ltd A/C 7500 31-12-1996 By DepreciationA/C
By Balance c/d
750
6750
7500 7500
1-1-1997 To Balance b/d 6750 31-12-1997 By DepreciationA/C
By Balance c/d
675
6075
6750 6750
1-1-1998 To Balance b/d 6075 31-12-1998 By DepreciationA/C
By Balance c/d
608
5467
6075 6075
1-1-1999 To Balance b/d 5467 31-12-1999 By DepreciationA/C
By Balance c/d
548
4919
5467 5467
1-1-2000 To Balance b/d 4919 31-12-2000 By DepreciationA/C
By Balance c/d
492
4427
4919 4919
1-1-2001 To Balance b/d 4427

9. Part iv: Hire Purchase Accounts M.COM FINAL
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(2) Star Co Ltd (Hire Vender) Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
1-1-1996
31-12-1996
To Cash & Bank A/C
To Cash & Bank A/C
To Balance c/d
1000
1500
5325
1-1-1996
31-12-1996
By Machine A/C
By InterestA/C
7500
325
7825 7825
31-12-1997 To Cash & Bank A/C
To Balance c/d
1500
4091
1-1-1997
31-12-1997
By Balance b/d
By InterestA/C
5325
266
5591 5591
31-12-1998 To Cash & Bank A/C
To Balance c/d
1500
2796
1-1-1998
31-12-1998
By Balance b/d
By InterestA/C
4091
205
4296 4296
31-12-1999 To Cash & Bank A/C
To Balance c/d
1500
1436
1-1-1999
31-12-1999
By Balance b/d
By InterestA/C
2796
140
2936 2936
31-12-2000 To Cash & Bank A/C 1500 1-1-2000
31-12-2000
By Balance b/d
By InterestA/C
1436
64
1500 1500
Q 4: Solution:
Dawn Payment:
Installment:(12500 * 4)
Total Payment in four
Years(Including interest)
Cash price
Interest
Rs 5000
50000
55000
50000
5000

10. Part iv: Hire Purchase Accounts M.COM FINAL
Arshad Islam; Contact No: 0092-313-9911865; E-Mail: Arshad_mccm@yahoo.com Page 10
Analytical Interest Table
Year Particulars Payment Interest Principle amount Balance
1-1-1997 Cash price 50000
1-1-1997 Downpayment 5000 5000 45000
31-12-
1997
1st installment
(5000 * 4 / 10)
12500 2000 10500 34500
31-12-
1998
2nd
installment
(5000 * 3 / 10)
12500 1500 11000 23500
31-12-
1999
3rd
installment
(5000 * 2 / 10)
12500 1000 11500 12000
31-12-
2000
4th
installment
(5000 * 1/10)
12500 500 12000 0
Total 55000 5000 50000 NIL
In the books of Hindustan Motor Ltd (Hire Vender)
Ledger Accounts
(1) J. Colliery Company (Hire Purchaser)Account
Date Particulars
Amount
(Rs)
Date Particulars
Amount
(Rs)
1-1-1997
31-12-1997
To HP Sales A/C
To InterestA/C
50000
2000
1-1-1997
31-12-1997
By Cash & Bank A/C
By Cash & Bank A/C
By Balance c/d
5000
12500
34500
52000 52000
1-1-1998
31-12-1998
To Balance b/d
To InterestA/C
34500
1500
31-12-1998
31-12-1998
By Cash & Bank A/C
By Balance c/d
12500
23500
36000 36000
1-1-1999
31-12-1999
To Balance b/d
To InterestA/C
23500
1000
31-12-1999
31-12-1999
By Cash & Bank A/C
By Balance c/d
12500
12000
24500 24500
1-1-2000
31-12-2000
To Balance b/d
To InterestA/C
12000
500
31-12-2000 By Cash & Bank A/C 12500
12500 12500

11. Part iv: Hire Purchase Accounts M.COM FINAL
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(2) Interest Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
31-12-1997 To Profit& Loss A/C 2000 31-12-1997 By J.CollieryCompany A/C 2000
2000 2000
31-12-1998 To Profit& Loss A/C 1500 31-12-1998 By J.CollieryCompanyA/C 1500
1500 1500
31-12-1999 To Profit& Loss A/C 1000 31-12-1999 By J.CollieryCompanyA/C 1000
1000 1000
31-12-2000 To Profit& Loss A/C 500 31-12-2000 By J.CollieryCompanyA/C 500
500 500
Q 5: Solution: Analytical Interest Table
Year Particulars Payment Interest Principle amount Balance
1-1-1998 Cash price 37250
1-1-1998 Downpayment 10000 10000 27250
31-12-
1998
1st installment
(27250 * 5 / 100)
10000 1363 8637 18613
31-12-
1999
2nd
installment
(18613 * 5 / 100)
10000 931 9069 9544
31-12-
2000
3rd
installment
(10000 - 9544)
10000 456 9544 0
Total 40000 2750 37250 NIL
In the books of Bombay Motors Ltd (Hire Vender)
Ledger Accounts
(1) Madras Transport Company (Hire Purchaser)Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
1-1-1998
31-12-1998
To HP SalesA/C
To InterestA/C
37250
1363
1-1-1998
31-12-1998
By Cash & Bank A/C
By Cash & Bank A/C
By Balance c/d
10000
10000
18613
38613 38613
1-1-1999
31-12-1999
To Balance b/d
To InterestA/C
18613
931
31-12-1999
31-12-1999
By Cash & Bank A/C
By Balance c/d
10000
9544
19544 19544
1-1-2000
31-12-2000
To Balance b/d
To InterestA/C
9544
456
31-12-2000 By Cash & Bank A/C 10000
10000 10000

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(2) Interest Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
31-12-1998 To Profit& Loss A/C 1363 31-12-1998 By Madras Trnspt.CoA/C 1363
1363 1363
31-12-1999 To Profit& Loss A/C 931 31-12-1999 By Madras Trnspt.CoA/C 931
931 931
31-12-2000 To Profit& Loss A/C 456 31-12-2000 By Madras Trnspt.CoA/C 456
456 456
Q 6: Solution:
Analytical Interest Table
Year Particulars Payment Interest Principle amount Balance
1-1-1998 Cash price 12894
1-1-1998 Downpayment 2000 2000 10894
1-1-1999 1st installment
(10894 * 5 / 100)
4000 545 3455 7439
1-1-2000 2nd
installment
(7439 * 5 / 100)
4000 372 3628 3811
1-1-2001 3rd
installment
(4000 - 3811)
4000 189 3811 0
Total 14000 1106 12894 NIL
Depreciationcalculation:
Year Beginning balance (Rs) Depreciation (Rs) Ending balance (Rs)
1998 12894 (12894*20/100) = 2579 (12894 – 2579) = 10315
1999 10315 2063 8250
2000 8250 1650 6600
2001 6600 1320 5280

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In the booksof Indian Plastic Ltd (Hire Purchaser)
Ledger Accounts
(1) Delivery Van Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
1-1-1998 To Hindostan AutoLtd A/C 12894 31-12-1998 By DepreciationA/C
By Balance c/d
2579
10315
12894 12894
1-1-1999 To Balance b/d 10315 31-12-1999 By DepreciationA/C
By Balance c/d
2063
8250
10315 10315
1-1-2000 To Balance b/d 8250 31-12-2000 By Depreciation A/C
By Balance c/d
1650
6600
8250 8250
1-1-2001 To Balance b/d 6600 31-12-2001 By DepreciationA/C
By Balance c/d
1320
5280
6600 6600
1-1-2002 To Balance b/d 5280
(2) Hindostan Auto Ltd (Hire Vender) Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
1-1-1998
1-1-1999
To Cash & Bank A/C
To Cash & Bank A/C
To Balance c/d
2000
4000
7439
1-1-1998
31-12-1998
By DeliveryVan A/C
By InterestA/C
12894
545
13439 13439
1-1-2000 To Cash & Bank A/C
To Balance c/d
4000
3811
1-1-1999
31-12-1999
By Balance b/d
By InterestA/C
7439
372
7811 7811
1-1-2001 To Cash & Bank A/C 4000 1-1-2000
31-12-2000
By Balance b/d
By InterestA/C
3811
189
4000 4000
Q 7: Solution:
Analytical Interest Table
Year Particulars Payment Interest Principle amount Balance
1-1-1998 Cash price 33525
1-1-1998 Downpayment 9000 9000 24525
31-12-
1998
1st installment
(24525 * 5 / 100)
9000 1226 7774 16751
31-12-
1999
2nd
installment
(16751 * 5 / 100)
9000 838 8162 8589
31-12-
2000
3rd
installment
(9000 - 8589)
9000 411 8589 0
Total 36000 2475 33525 NIL

14. Part iv: Hire Purchase Accounts M.COM FINAL
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Depreciationcalculation:
Year Beginning balance (Rs) Depreciation (Rs) Ending balance (Rs)
1998 33525 (33525*10/100) = 3353 (33525 – 3353) = 30172
1999 30172 3017 27155
2000 27155 2716 24439
In the books of Welman Co Ltd (Hire Purchaser)
Ledger Accounts
(1) Machine Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
1-1-1998 To MachineryCo Ltd A/C 33525 31-12-1998 By DepreciationA/C
By Balance c/d
3353
30172
33525 33525
1-1-1999 To Balance b/d 30172 31-12-1999 By DepreciationA/C
By Balance c/d
3017
27155
30172 30172
1-1-2000 To Balance b/d 27155 31-12-2000 By DepreciationA/C
By Balance c/d
2716
24439
27155 27155
1-1-2001 To Balance b/d 24439
(2) Machinery Co Ltd (Hire Vender) Account
Date Particulars
Amount
(Rs)
Date Particulars
Amount
(Rs)
1-1-1998
31-12-1998
To Cash & Bank A/C
To Cash & Bank A/C
To Balance c/d
9000
9000
18000
1-1-1998
1-1-1998
By Machine A/C
By InterestSuspense
A/C
33525
2475
36000 36000
31-12-1999 To Cash & Bank A/C
To Balance c/d
9000
9000
1-1-1999 By Balance b/d 18000
18000 18000
31-12-2000 To Cash & Bank A/C 9000 1-1-2000 By Balance b/ 9000
9000 9000

15. Part iv: Hire Purchase Accounts M.COM FINAL
Arshad Islam; Contact No: 0092-313-9911865; E-Mail: Arshad_mccm@yahoo.com Page 15
(3) Interest Suspense Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
31-12-1998 To Profit& Loss A/C
To Balance c/d
1226
1249
1-1-1998 By MachineryCo Ltd A/C 2475
2475 2475
31-12-1999 To Profit& Loss A/C
To Balance c/d
838
411
1-1-1999 By Balance b/d 1249
1249 1249
31-12-2000 To Profit& Loss A/C 411 1-1-2000 By Balance b/d 411
411 411
Q 8: Solution:
Analytical Interest Table
Year Particulars Payment Interest Principle amount Balance
1-1-98 Cash price 37000
1-1-98 Downpayment 5000 5000 32000
31-12-98 1st installment
(32000*5/100)
9600 1600 8000 24000
31-12-99 2nd
installment
(24000*5/100)
9200 1200 8000 16000
31-12-
2000
3rd
installment
(16000*5/100)
8800 800 8000 8000
31-12-
2001
3rd
installment
(8000*5/100)
8400 400 8000 0
Total 41000 4000 37000 NIL
Depreciationcalculation:
Year Beginning balance (Rs) Depreciation (Rs) Ending balance (Rs)
1998 37000 (37000*10/100) = 3700 (37000 – 3700) = 33300
1999 33300 3330 29970
2000 29970 2997 26973
2001 26973 2697 24276

16. Part iv: Hire Purchase Accounts M.COM FINAL
Arshad Islam; Contact No: 0092-313-9911865; E-Mail: Arshad_mccm@yahoo.com Page 16
In the books of “A” (Hire Purchaser)
Ledger Accounts
(1) Machine Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
1-1-1998 To “B” A/C 37000 31-12-1998 By DepreciationA/C
By Balance c/d
3700
33300
37000 37000
1-1-1999 To Balance b/d 33300 31-12-1999 By DepreciationA/C
By Balance c/d
3330
29970
33300 33300
1-1-2000 To Balance b/d 29970 31-12-2000 By DepreciationA/C
By Balance c/d
2997
26973
29970 29970
1-1-2001 To Balance b/d 26973 31-12-2001 By DepreciationA/C
By Balance c/d
2697
24276
26973 26973
1-1-2002 To Balance b/d 24276
(2) “B” (Hire Vender) Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
1-1-1998
31-12-1998
To Cash & Bank A/C
To Cash & Bank A/C
To Balance c/d
5000
9600
26400
1-1-1998
1-1-1998
By Machine A/C
By InterestSuspenseA/C
37000
4000
41000 41000
31-12-1999 To Cash & Bank A/C
To Balance c/d
9200
17200
1-1-1999 By Balance b/d 26400
26400 26400
31-12-2000 To Cash & Bank A/C
To Balance c/d
8800
8400
1-1-2000 By Balance b/d 17200
17200 17200
31-12-2001 To Cash & Bank A/C 8400 1-1-2001 By Balance b/d 8400
8400 8400

17. Part iv: Hire Purchase Accounts M.COM FINAL
Arshad Islam; Contact No: 0092-313-9911865; E-Mail: Arshad_mccm@yahoo.com Page 17
(3) Interest Suspense Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
31-12-1998 To Profit& Loss A/C
To Balance c/d
1600
2400
1-1-1998 By “B” A/C 4000
4000 4000
31-12-1999 To Profit& Loss A/C
To Balance c/d
1200
1200
1-1-1999 By Balance b/d 2400
2400 2400
31-12-2000 To Profit& Loss A/C
To Balance c/d
800
400
1-1-2000 By Balance b/d 1200
1200 1200
31-12-2001 To Profit& Loss A/C 400 1-1-2001 By Balance b/d 400
400 400
Q 9: Solution:
Analytical Interest Table
Year Particulars Payment Interest Principle amount Balance
1-1-1999 Cash price 30000
1-1-1999 Downpayment 5000 5000 25000
31-12-
1999
1st installment
(25000 * 10/ 100)
10000 2500 7500 17500
31-12-
2000
2nd
installment
(17500 * 10/ 100)
10000 1750 8250 9250
31-12-
2001
3rd
installment
(9250 * 10/ 100)
10175 925 9250 0
Total 35175 5175 30000 NIL

18. Part iv: Hire Purchase Accounts M.COM FINAL
Arshad Islam; Contact No: 0092-313-9911865; E-Mail: Arshad_mccm@yahoo.com Page 18
In the books of Engineer (Hire Purchaser)
Ledger Accounts
(1) Machinery Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
1-1-1999 To Marshall’s A/C 30000 31-12-1999 By DepreciationA/C
By Balance c/d
6000
24000
30000 30000
1-1-2000 To Balance b/d 24000 31-12-2000 By DepreciationA/C
By Balance c/d
4800
19200
24000 24000
1-1-2001 To Balance b/d 19200 31-12-2001 By DepreciationA/C
By Balance c/d
3840
15360
19200 19200
1-1-2002 To Balance b/d 15360
(2) Marshall’s (Hire Vender) Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
1-1-1999
31-12-1999
To Cash & Bank A/C
To Cash & Bank A/C
To Balance c/d
5000
1000
17500
1-1-1999
1-1-1999
By MachineryA/C
By Interest A/C
30000
2500
32500 32500
31-12-2000 To Cash & Bank A/C
To Balance c/d
10000
9250
1-1-2000
31-12-2000
By Balance b/d
By InterestA/C
17500
1750
19250 19250
31-12-2001 To Cash & Bank A/C 10175 1-1-2001
31-12-2001
By Balance b/d
By InterestA/C
9250
925
10175 10175

19. Part iv: Hire Purchase Accounts M.COM FINAL
Arshad Islam; Contact No: 0092-313-9911865; E-Mail: Arshad_mccm@yahoo.com Page 19
Q 10: Solution:
Working Notes:
Analytical Interest Table
Year Particulars Payment Interest Principle amount Balance
30-6-2000 Cash price 17000
30-6-2000 Downpayment 4000 4000 13000
31-12-
2000
1st installment
(13000 * 6 / 100 *6/12)
2400 390 2010 10990
30-6-2001 2nd
installment
(10990 * 6 / 100 *6/12)
2400 330 2070 8920
31-12-
2001
3rd
installment
(8290 * 6 / 100 *6/12)
2400 268 2132 6788
30-6-2002 4th
installment
(6788 * 6/100 *6/12)
2400 204 2196 4592
31-12-
2002
5th
installment
(4592 * 6/100 * 6/12)
2400 138 2262 2330
30-6-2003 6th
installment
(2400 - 2330)
2400 70 2330 0
Total 18400 1400 17000 NIL
Depreciationcalculation:
Year Beginning balance (Rs) Depreciation (Rs) Ending balance (Rs)
2000 17000 (17000*10/100 * 6/12) = 850 (17000 – 850) = 16150
2001 16150 (16150*10/100) = 1615 (16150 – 1615) = 14535
2002 14535 1454 13081
2003 13081 1308 11773

20. Part iv: Hire Purchase Accounts M.COM FINAL
Arshad Islam; Contact No: 0092-313-9911865; E-Mail: Arshad_mccm@yahoo.com Page 20
In the books of Sri S Gupta (Hire Purchaser)
Ledger Accounts
(1) Machine Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
30-6-2000 To B C Ltd A/C 17000 31-12-2000 By DepreciationA/C
By Balance c/d
850
16150
17000 17000
1-1-2001 To Balance b/d 16150 31-12-2001 By DepreciationA/C
By Balance c/d
1615
14535
16150 16150
1-1-2002 To Balance b/d 14535 31-12-2002 By DepreciationA/C
By Balance c/d
1454
13081
14535 14535
1-1-2003 To Balance b/d 13081 31-12-2003 By DepreciationA/C
By Balance c/d
1308
11773
13081 13081
1-1-2004 To Balance b/d 11773
(2) B C Ltd (Hire Vender) Account
Date Particulars Amount (Rs) Date Particulars Amount (Rs)
30-6-2000
31-12-2000
To Cash & Bank A/C
To Cash & Bank A/C
To Balance c/d
4000
2400
10990
30-6-2000
31-12-2000
By Machine A/C
By InterestA/C
17000
390
17390 17390
30-6-2001
31-12-2001
To Cash & Bank A/C
To Cash & Bank A/C
To Balance c/d
2400
2400
6788
1-1-2001
30-6-2001
31-12-2001
By Balance b/d
By InterestA/C
By InterestA/C
10990
330
268
11588 11588
30-6-2002
31-12-2002
To Cash & Bank A/C
To Cash & Bank A/C
To Balance c/d
2400
2400
2330
1-1-2002
30-6-2002
31-12-2002
By Balance b/d
By InterestA/C
By InterestA/C
6788
204
138
7130 7130
30-6-2003 To Cash & Bank A/C 2400 1-1-2003
30-6-2003
By Balance b/d
By InterestA/C
2330
70
2400 2400