Preparation of Hire Purchase Account And The Vendor’s Account - SS3 Accounting Lesson Note
Question:
The following transactions were derived from the books of MUSA VENTURES for the month of March 2022. You are required to prepare in tabular form:
-
The hire purchase account
The vendor’s accounts
|
Date |
Transaction
Amount
03/01/2022
Purchased goods from ABC Suppliers on hire purchase
₦100,000
03/03/2022
Sold goods to XYZ Co. for cash
₦50,000
03/05/2022
Received goods from ABC Suppliers on hire purchase
₦100,000
03/07/2022
Sold goods to PQR Inc. on hire purchase
₦80,000
03/10/2022
Made a down payment to ABC Suppliers for hire purchase
₦20,000
03/12/2022
Received payment from PQR Inc. for hire purchase sale
₦30,000
03/15/2022
Paid instalment to ABC Suppliers for hire purchase
₦20,000
03/18/2022
Sold goods to MNO Corp. for cash
₦40,000
03/20/2022
Received payment from XYZ Co. for cash sale
₦50,000
03/23/2022
Received payment from MNO Corp. for cash sale
₦40,000
03/25/2022
Paid instalment to ABC Suppliers for hire purchase
₦20,000
03/28/2022
Sold goods to RST Co. for cash
₦30,000
Note:
-
We assume that the hire purchase agreement with ABC Suppliers has an interest rate of 14% per annum, calculated on a simple interest basis.
The interest on each instalment is calculated as follows: Interest = (Balance x Rate x Time) / 365, where Rate = 14% and Time is the number of days since the last payment.
Answer:
Vendor's BooksABC Suppliers Hire Purchase Ledger for MUSA VENTURES
|
Date |
Transaction
Instalment (₦)
Interest (₦)
Total (₦)
Balance (₦)
03/01/2022
03/05/2022
03/10/2022
03/15/2022
03/25/2022
Total
Sold goods
Received payment
Received down payment
Received instalment
Received instalment
0
0
0
20,000
20,000
40,000
0
0
0
4,000
2,800
6,800
100,000
0
20,000
24,000
22,800
166,800
100,000
100,000
80,000
56,000
33,200
33,200
Hirer's Books
MUSA VENTURES Hire Purchase Ledger with ABC Suppliers
|
Date |
Transaction
Instalment (₦)
Interest (₦)
Total (₦)
Balance (₦)
03/01/2022
03/05/2022
03/10/2022
03/15/2022
03/25/2022
Total
Purchased goods
Received goods
Made a down payment
Paid instalment
Paid instalment
0
0
0
20,000
20,000
40,000
0
0
0
4,000
2,800
6,800
100,000
0
20,000
24,000
22,800
166,800
100,000
100,000
80,000
56,000
33,200
33,200
Note:
-
The Vendor's books show the transactions related to the hire purchase agreement from the vendor's perspective.
The Hirer's books show the transactions related to the hire purchase agreement from the hirer's perspective.