Page 1
Problems based on Ledger’s Preparation
Problem 11.
Machinery is sold on hire-purchase. The terms of payment is four annual installments of ` 6,000 at
the end of each year commencing from the date of agreement. Interest is charged @ 25% and is
included in the annual payment of ` 6,000. Show machinery A/c and Hire Vendor A/c in the
books of the purchaser who defaulted in the payment of the third yearly payment whereupon the
vendor re-possessed the machinery. The purchaser provides depreciation on the machinery @ 10%
per annum.
Solution Analysis Table
No. of Installment
Cash Price Interest Installment with Interest
DP - - -
I 2458 (6000 + 3072 + 3840 + 4800)×25/125 =3,542 6000
II 3072 (6000 + 3840 + 4800) ×25/125 =2,928 6000
III 3840 (6,000 + 4800) × 25/125 = 2,160 6000
IV 4800 6,000 × 25/125 = 1,200 6000
14,170 9,830 24,000
Hire Vender In the books of hire Purchase
Particulars Dr. (`) Cr. (`)
1.
At the time of contract of HP is recorded as credit purchase
Machine A/c
Dr.
To Hire vender A/c
14,170
14,170
2.
Down Payment made
Hire vender A/c -
Dr.
To Bank
xx
xx
3.
(a)
(b)
When Instal. Become due, Interest is recognised as expense
Interest A/c
Dr.
To Hire vender A/c
Hire vender A/c
Dr.
3,542
6,000
3,542
6,000
Page 2
Topper’s Institute Hire-Purchase 6.2
To Bank
4. At end of the year depreciation will be charge
Dep. A/c
Dr.
To Machine
(14170 × 10%)
1,417
1,417
5. W/O Dep. Total Int. accrued during the yr.
P/L A/c
Dr.
To Dep. A/c
To Interest A/c
4,959
1,417
3,542
(a) Int. A/c
Dr.
To Hire Vender
2,928
2,928
(b) Hire Vender A/c
To Bank
6,000
6,000
Dep. A/c
Dr.
To Machine
(14,170 – 1,417) × 10%
1,275
1,275
W/O Dep. & total Int.
P/L A/c
Dr.
To Dep.
To Interest A/c
4,203
1,275
2,928
Machinery A/c
Date Particulars (`) Date Particulars (`)
1st Yr. To Hire Vendor A/c 1,4170 I By Depreciation A/c
By Balance c/d
1,417
12,753
1,4170 14,170
IInd Yr. To Balance b/d 12,753 II By Depreciation A/c
By Balance c/d
1,275
11,478
12,753 12,753
III To Balance b/d
To Profit on Repossed
11,478
470
III By Depreciation A/c
By Hire vendor A/c
1,148
10,800
11,948 11,948
Depreciation will be charge till the date of actual of repossession.
Hire Vendor A/c
Date Particulars (`) Date Particulars (`)
1st Yr. To Bank (D.P)
To Bank A/c
To Balance c/d
Nil
6,000
11,712
1st Yr. By Machine A/c
By Interest A/c
14,170
3,542
Page 3
Topper’s Institute Hire-Purchase 6.3
17,712 17,712
2nd Yr. To Bank A/c
To Balance c/d
6,000
8,640
II By Balance b/d
By Interest A/c
11,712
2,928
14,640 14,640
3rd To Machine A/c (b/f) 10,800 III By Balance b/d
By Interest A/c
8,640
2,160
10,800 10,800
Interest will be charge till the date of actual repossession.
Repossession:
Hire vendor’s A/c – Dr. 10,800
(Baln of his A/c)
To Machine A/c 10,330
(W.D.V on date of repossation)
To Profit on Reposation A/c (470)
Interest Suspense A/c
Date Particulars ` Date Particulars `
I
II
III
To H.V. A/c
To Balance b/d
To Balance b/d
9,830
9,830
6,288
6,288
3,360
3,360
I
II
III
By Interest A/c
By c/d
By Interest A/c
By c/d
By Interest A/c
By H.V. A/c
(B/f)
3,542
6,288
9,830
2,928
3,360
6,288
2,160
1,200
3,360
H.V. A/c
Date Particulars ` Date Particulars `
I
II
III
To Bank
To c/d
To Bank
To c/d
To Interest suspense A/c
To Machine A/c
(B/f)
6,000
18,000
24,000
6,000
12,000
1,200
10,800
12,000
I
II
III
By Machine A/c
By Interest suspense A/c
By Balance b/d
By Balance b/d
14,170
9,830
24,000
18,000
18,000
12,000
12,000
Page 4
Topper’s Institute Hire-Purchase 6.4
Problem 12.
On 1st January, 2001, Ashok acquired furniture on the hire-purchase system from Real Aids Ltd.
agreeing to pay four semi-annual Installments of ` 800 each, commencing on 30th June, 2001. The
Cash price of the furniture was ` 3,010 and interest of 5% per annum at half yearly rest was
chargeable. On 30th September, 2001. Ashok expresses his inability to continue and Real Aids
seized the property. It was agreed that Ashok would pay the due proportion of the installment
upto the date of seizure and also a further sum of ` 200 towards depreciation. At the time of re-
possession, Real Aids valued the furniture at ` 1,500. The Company after incurring ` 200 towards
repairs of the furniture, sold the items for `1,800 on 15th October, 2001.
Required : Prepare the Ledger accounts in the books of the Vendor and the Purchase presuming
that the purchaser charges depreciation @ 10% p.a.
Solution Analysis Table
No. of Installment Cash price Interest Installment
DP
I
II
III
IV
3,010
-
3,010
725
2,285
743
1,542
761
781
781
-
3,010 × 5% × 1/12 = 75
57
39
19
-
800
800
800
800
Repo. Stock A/c
Date Particulars ` Date Particulars `
30.9
30.9
To Ashok A/c
To Balance b/d
To Bank (Repay)
To P/L A/c
1,714
1,714
1,500
200
100
1,800
30.9
15.10
By P/L A/c
By c/d
By Bank (Sales)
214
1,500
1,714
1,800
1,800
Books of Ashok
Furniture Account
Date Particulars (`) Date Particulars (`)
01.01.2001 To Real Aids Ltd. 3,010 30.09.2001 By Depreciation A/c
(10% on ` 3,010 for 9 months) 226
By Real Aids Ltd. 1,714
By Profit & Loss A/c (Loss) 1,070
3,010 3,010
Page 5
Topper’s Institute Hire-Purchase 6.5
Real Aids Ltd.’s Account
Date Particulars (`) Date Particulars (`)
30.06.2001 To Bank A/c 800 01.01.2001 By Furniture A/c 3,010
30.09.2001 To Bank A/c 400 30.06.2001 By Interest A/c 75
M
M
6
3800 30.09.2001 By Interest 29
[(` 2,285.25)@ 5% p.a. for 3m]
To Bank (Repairs) 200
30.09.2001 To Furniture A/c 1,714
3,114 3,114
Interest Account
Date Particulars (`) Date Particulars (`)
30.06.2001 To Real Aids 75 By P & L A/c 104
30.09.2001 To Real Aids Ltd. 29
104 104
An Extract of Profit and Loss Account of Ashok
Particulars (`) Particulars (`)
To Interest A/c 104 By Profit on Valuation of Goods 1,400
To Loss on Seizure of goods 1,070
To Depreciation on Furniture 226
1,400 1,400
Books of Real Aid Ltd. Ashok’s A/c
Date Particulars (`) Date Particulars (`)
01.01.2001 To Hire 30.06.2001 By Bank A/c 800
Sales A/c 3,010 30.06.2001 By Bank A/c 600
30.06.2001 To Interest A/c 30.09.2001
(on ` 3,010) 75
30.09.2001 To Interest A/c 30.09.2001 By Rep. Stock (Bal. fig.) 1,714
(` 2,285.25) 29
3,114 3,114
An Extract of Profit and Loss Account of Real Aid Ltd.
Particulars (`) Particulars (`)
To Loss on valuation of goods By Interest on H.P. Sales 103.82
repossessed 213.82 By Hire Purchase Goods
Repossessed A/c (Profit) 100.00
Problem 13.
On 1st April, 2012, M/s. Power Motors sold on hire purchase basis a truck whose cash price was
`9,00,000 to M/s. Singh & Singh, a firm of transporters. The terms of the contract were that the
Page 6
Topper’s Institute Hire-Purchase 6.6
transporters were to pay ` 3,00,000 down and six four-monthly installments of `1,00,000 plus
interest on outstanding amount of cash price for the intervening four months. The installments
were payable on 31st July, 30th November and 31st March in each, one of the two accounting
years. Interest was calculated @ 12% per annum.
M/s. Singh & Singh duly paid the installment on 31st July, 2012 but failed to pay the installment
on 30th November, 2012. M/s. Power Motors, after legal formalities, repossessed the truck valuing
it at `7,00,000.
M/s. Power Motors spent ` 80,000 on repairs and repainting of the truck and on 7th January, 2013
sold it for `7,50,000 cash.
You are required to prepare the account of M/s. Singh & Singh an Goods Repossessed Account in
the books of M/s. Power Motors. [May-2013, 8 Marks]
Solution Analysis Table
No. of Installment Cash price Interest Installment
DP
I
II
III
IV
V
VI
9,00,000
3,00,000
6,00,000
1,00,000
5,00,000
1,00,000
4,00,000
1,00,000
3,00,000
1,00,000
2,00,000
1,00,000
1,00,000
1,00,000
6,00,000 × 12% × 4/12
=24,000
5,00,000 × 12% × 4/12
=20,000
16,000
12,000
8,000
4,000
3,00,000
1,24,000
1,20,000
1,16,000
1,12,000
1,08,000
1,04,000
1,00,000 84,000
Cost 5,20,000
Valuation (NRV) 7,00,000
Valuation for books is 5,20,000(whichever is lower)
In the books of Power Motors Ltd. M/s Singh & Singh A/c
Date Particular (`) Date Particular (`)
1.4.12
31.7.12
30.11.12
To H.P. Sales
To Interest A/c
(6,00,000×12%×4/12)
To Interest A/c
(5,00,000×12%×4/12)
9,00,000
24,000
20,000
1.4.12
31.7.12
Dec 12
By Bank A/c
By Bank A/c
By Rep. Goods A/c (b/f)
3,00,000
1,24,000
5,20,000
9,44,000 9,44,000
Page 7
Topper’s Institute Hire-Purchase 6.7
Repossessed Goods A/c
Date Particular (`) Date Particular (`)
30.11.12
7.1.13
7.1.13
To Singh & Singh A/c
To Bank A/c (Repairs)
To P/L A/c
5,20,000
80,000
1,50,000
7.1.13
By Bank A/c
7,50,000
7,50,000 7,50,000
Problem 14.
Repaid Engineering Works sold to Ratan Ltd. a machine of the cash value of ` 31,360 on hire
purchase basis on 1st April, 2001. A sum of ` 9,000 was paid at the time of delivery. The balance
was payable in three equal annual installments of ` 9,000 each payable on 31st March of every
year. Interest was charged @ 10% per annum. The purchaser charged 10% depreciation per
annum on the diminishing balances of the machine.
Hire – Purchase failed to pay the installment due on 31st March, 2003. Repaid engineering works
obtained the permission of the court to repossess the machine as a result of default the purchaser
and having completed all the statutory requirements took possession of the machine on 31 st may,
2003. Prepare the necessary ledger accounts in the books of hire-purchase.
Solution Analysis Table
No. of Installment Cash price Interest Installment
DP
I
II
III
31,360
9,000
22,360
6,764
15,596
7,440
8,156
Nil
22,360 × 10% × 1=2,236
15,596 × 10% × 1=1,560
9,000 – 8,156 = 844
9,000
9,000
9,000
9,000
Page 8
Topper’s Institute Hire-Purchase 6.8
Machinery A/c
Date Particulars (`) Date Particulars (`)
01.4.2001 To Rapid 31.3.2002 By Depreciation A/c
Engineering (@ 10% on Rs. 31,360) 3,136
Work (Total cash price) 31,360 By Balance c/d 28,224
31,360 31,360
01.4.2002 To Balance b/d 28,224 31.3.2003 By Depreciation
(@ 10% on `28,224) 2,822
31.3.2003 By Bal. c/d 25,402
28,224 28,224
1.4.203 To Balance b/d 25,402 31.5.2003 By Depreciation A/c 423
(25402×10%×2/12)
By Repairs & Engineering 1,7442
By P&L A/c 7,537
25,402 25,402
Rapid Engineering Ltd. A/c
Date Particulars (`) Date Particulars (`)
01.04.2001 To Bank 01.04.2001 By Machinery A/c 31,360
(down payment) 9,000 31.03.2002 By Interest A/c
31.03.2002 To Bank A/c (` 22,360 10/100) 2,236
(1st Instalment) 9,000
31.03.2002 To Balance c/d 15,596 ______
33,596 33,596
31.03.2002 To Machinery A/c 01.04.2002 By Balance b/d 15,596
(Transfer of balance) 17,156 31.3.02 By Interest A/c
(`15,596 10%) 1,560
17,156 17,156
31.5.2003 To Machinery A/c (b/f) 17,442
1.4.2003 By Balance b/d 17,156
31.05.2003 By Intt A/c 286
(17156×10%×2/12)
17,442 17,442
Problem 15.
X Transport Ltd. Purchased from Delhi Motors 3 tempos costing ` 50,000 each on the Hire-
purchase system on 1.1.1987 payment was to be made ` 30,000 down and the remainder in 3
equal annual installments payable on 31.12.87, 31.12.88 and 31.12.89 together with interest @ 9%
X Transport Ltd. Write off depreciation at the rate of 20% on the diminishing balance.
It paid the installment due at the end of the first year i.e., 31.12.1987 but could not pay the next on
31.12.1988. Delhi Motors agreed to leave one tempo with the purchaser on 1.1.1989 adjusting the
value of the other 2 tempos against the amount due on 1.1.1989. The tempos were valued on the
basis of 30% depreciation annually. Show the necessary A/c for the year 87, 88, 89.
Page 9
Topper’s Institute Hire-Purchase 6.9
Solution In the books of X Transport Ltd.
Tempos Account
Date Particulars (`) Date Particulars (`)
1.1.87 To Delhi Motors A/c 1,50,000 31.12.87 By Depreciation A/c 30,000
31.12.87 By Balance c/d 1,20,000
1,50,000 1,50,000
1.1.88 To Balance b/d 1,20,000 31.12.88 By Depreciation A/c 24,000
31.12.88 By Balance c/d 96,000
1,20,000 1,20,000
1.1.89 To balance b/d 96,000
1.1.89 By Delhi Motors 49,000
1.1.89 By Loss on repossession 15,000
31.12 By Depreciation 6,400
(32,000×20%)
31.12.89 By Balance c/d 25,600
96,000 96,000
Analysis Table
No. Balance Interest Amount
DP
I
II
III
1,50,000
30,000
1,20,000
40,000
80,000
40,000
40,000
40,000
NIL
-
1,20,000 × 9/100 = 10,800
80,000 × 9/100 = 7,200
40,000 × 9/100 = 3,600
30,000
50,800
47,200
43,600
Page 10
Topper’s Institute Hire-Purchase 6.10
Delhi Motors Ltd. A/c
Date Particulars ` Date Particulars `
1.1.87
31.12.87
31.12.87
31.12.88
1.1.89
31.12.89
To Bank A/c [Down Payment]
To Bank A/c
To Balance c/d
To Balance c/d
To Tempo A/c
To Bank A/c
(38,200+3,438)
30,000
50,800
80,000
1.1.87
31.12.87
1.1.88
1.1.89
By Tempo A/c (5,000×3)
By Interest (9% on 1,20,000)
By Balance b/d
By Interest A/c
By Balance b/d
By Interest A/c (38,200 ×9%)
1,50,000
10,800
1,60,800 1,60,800
87,200
80,000
7,200
87,200 87,200
49,000
41,638
87,200
3,438
90,638 90,638
Working Notes
(1) Book Value of two Tempos Repossessed (`)
Cost of two Tempos (` 50,000 × 2) 1,00,000
Less : Depreciation of 1987 @ 20% 20,000
80,000
Less : Depreciation of 1988 @ 20% 16,000
64,000
(2) Loss on Repossession of two Tempos
(`)
Cost of two Tempos 1,00,000
Less : Depreciation for 1987 @ 30% 30,000
70,000
Less : Depreciation of 1988 @ 30% 21,000
Agreed value of repossessed tempos 49,000
Book value 64,000
Less : Agreed value (as above) 49,000
Loss on repossession 15,000
DM Ltd. A/c………………….Dr. 49,000
Loss on Repossession A/c….DR 15,000
To Tempos A/c 64,000
Assuming balance is paid at end of year 89.
W/N-
Amount due 87200
Less: Agreed value of Tempos 49,000
38,200
Interest 3,438
Amount of Installment of end of year 41,638
Page 11
Topper’s Institute Hire-Purchase 6.11
Problem 16.
A firm acquired two tractors under hire purchase agreements, details of which were as following:
Date of Purchase Tractor A Tractor B
1st April’01 1st Oct.’01
Cash Price 14,000 19,000
Deposit (Down Payment) 2,000 2,680
Interest (deemed to accrue evenly
over the period of agreement) 2,400 2,880
Both agreements provided for payment to be made in twenty-four monthly installments,
commencing on the last day of the month following purchase, all installments being paid on due
dates.
On 30th June 2002 Tractor B was completely destroyed by fire. In full settlement, on 10 th July, 2002
an insurance company paid ` 15,000 under a comprehensive policy out of which `10,000 was paid
to the hire purchase company in termination of the agreement. Any balance on the hire purchase
company’s account in respect of these transactions was to be written off.
The firm prepared accounts annually to 31st Dec. and provided depreciation on tractors on a
straight-line basis at a rate of 20 per cent per annum rounded off to nearest ten rupees,
apportioned as from the date of purchase to the date of disposal.
You are required to record these transactions in the following accounts, carrying down the balance on 31st Dec., 2001 and 31st Dec., 2002:
(i) Tractors on the hire Purchase
(ii) Provision for depreciation of tractor
(iii) Disposal of tractor
(iv) Hire Purchase Company.
Solution Calculation of Installment
Particulars Tractor (A) Tractor (B)
Cash price
Less:- Deposit Balance
No. of Installment
Cash price per installment
+ Interest (evenly)
2,400 ÷ 24
2,880 ÷ 24
14,000
2,000
12,000
24
500
100
19,000
2,680
16,320
24
680
120
Amount of Installment including Interest 600 800
Page 12
Topper’s Institute Hire-Purchase 6.12
Tractors on Hire Purchase A/c
Date Particulars ` Date Particulars `
1.4.9
1.10
3.1
To H.P. Company A/c
To H.P. Company A/c
To Balance b/d
14,000
19,000
33,000
33,000
31.12
30.6.1
2
30.12
By Balance c/d
By Disposal of Tractor A/c
By Balance c/d
33,000
33,000
19,000
14,000
33,000 33,000
Provision for Depreciation A/c
Date Particulars ` Date Particulars `
31.12 To Balance c/d
To Assets Disposal A/c
( 950 +1,900)
To Balance c/d
3,050
____
3050
2,850
4,900
31.12
31.12
By Depreciation
(14,000×20%×9/12)
(19,000×20%×3/12)
By Balance b/d
By Depreciation
(19,000×20%×6/12)
(14,000×20%×1)
2,100
950
____
3050
3,050
1,900
2,800
7,750 7,750
Disposal of Tractor A/c
Date Particulars ` Date Particulars `
To Tractor A/c
To Bank A/c
19,000
Nil
31.12
By Bank A/c
By pro for Dep.
(950 + 1,900)
By P/L A/c
(Balancing figure)
15,000
2,850
1,150
19,000 19,000
Hire Purchase Company A/c [H.V.]
Date Particulars ` Date Particulars `
1.4
30.4
31.5
30.6
31.7
31.8
30.9
1.10
31.10
to 31.12
To Bank A/c
To Bank A/c
To Bank A/c
To Bank A/c
To Bank A/c
To Bank A/c
To Bank A/c
To Bank A/c
To Bank A/c (600 +
800)×3
2,000
600
600
600
600
600
600
2,680
4,200
1.4
30.4
31.5
30.6
31.7
31.8
30.9
1.10
31.10
30.1
By Tractor A/c
By Interest A/c
By Interest A/c
By Interest A/c
By Interest A/c
By Interest A/c
By Interest A/c
By Tractor A/c
By Interest A/c (100 + 120)
By Interest A/c
14,000
100
100
100
100
100
100
19,000
220
220
Page 13
Topper’s Institute Hire-Purchase 6.13
31.12
31.1
28.2
31.3
30.4
31.5
30.6
10.7
31.7
31.7
31.9
31.10
30.11
31.12
3.12
31.1
28.2
31.3
To Balance c/d
To Bank
To Bank
To Bank
To Bank
To Bank
To Bank
To Bank (final settlement)
To P/L A/c
To Bank A/c
To Bank A/c
To Bank A/c
To Bank A/c
To Bank A/c
To Bank A/c
To Balance c/d A/c
To Bank A/c
To Bank A/c
To Bank A/c
21,780
______
34,260
1,400
1,400
1,400
1,400
1,400
1,400
10,000
200
600
600
600
600
600
600
1,500
______
23,700
600
600
600
1.1
31.1 to
30.6
31.7
1.3
31.3
By Interest A/c
By Balance b/d
By Interest A/c (220 × 6)
By Interest A/c (100 × 6)
By Balance b/d
By Interest (100 × 3)
220
______
34,260
21,780
1,320
600
______
23,700
1,500
300
1,800 1,800
Working Notes:-
Cash price of Tractor B 19,000
Less:- Down payment (2,680)
Less:- Cash price paid through Installment (9 month × 680) 6,120
10,200
Final payment 10,000
Discount 200
Problem 17.
X purchased seven trucks on hire purchase on 1.7.68. The cash price of each truck was ` 50,000.
He was to pay 20% of the cash price at the time of delivery and the balance in five half yearly
installments starting from 31-12-68 with interest @ 5% per annum.
On X’s failure to pay the installment due on 30.6.69 it was agreed that X would return 3 trucks to
the vendor and the remaining 4 would be retained by him. The vendor agreed to allow him a
credit for the amount paid against these 3 trucks less 25%.
Page 14
Topper’s Institute Hire-Purchase 6.14
Show the relevant account in the books of X assuming that his books are closed in June every year
and depreciation @ 20% is charged on trucks.
Solution Analysis Table
No. Balance Interest Installment
Cash Price
DP
3,50,000
70,000
- 70,000
1 2,80,000
56,000
2,80,000 × 5% ×6/12 = 7,000
63,000
2 2,24,000
56,000
2,24,000 × 5% ×6/12 = 5,600 61,600
3 1,68,000
56,000
1,68,000 × 5% ×6/12 = 4,200 60,200
4 1,12,000
56,000
1,12,000 × 5% ×6/12 = 2,800 58,800
5 56,000
56,000
56,000 × 5% ×6/12 = 1,400 57,400
21,000 3,71,000
Hire Vendor Account Dr.
Cr. Date Particular (`) Date Particular (`)
1969 1969
July 1 To Cash 70,000 July 1 By Trucks 3,50,000
Dec. 31 To Cash (5,600 + 7,000) 63,000 Dec. 31 By Interest (5% on
` 2,80,000 for 6 months) 7,000
1969 1969
June 30 To Trucks 40,500 June 30 By Interest
To Balance c/d 1,89,100 (on ` 2,24,000) 5,600
3,62,600 3,62,600
1969
July 1 By Balance b/d 1,89,100
Dr. Trucks Account Cr.
1969 Particular (`) 1969 Particular (`)
July 1 To Hire vendor 3,50,000 June 30 By Deprecation 70,000
(350000×20%)
By H.V. 40 ,500
By Profit and loss a/c 79,500
By Balance c/d (4 trucks) 1,60,000*
3,50,000 3,50,000
Working Note:
Valuation of 3 trucks to be Repossessed
Amount paid for 3 truck
D.P = truck37
000,70 = 30,000
Page 15
Topper’s Institute Hire-Purchase 6.15
Ist Inst. = truck37
000,56 = 24,000
54,000
Less: 25% dis. 13,500
Agreed value for Repo. 40,500
Book Value 37
000,80,2 = 1,20,000
Loss on Repo. 79,500
Problem 18.
On 1st January, 1990 Anurag sells a truck to Alok, on the hire-purchase system based on Interest Suspense A/c on the following condition:
(i) The purchase price of the truck is ` 1,00,000.
(ii) This amount is payable to Anurag in three equal annual installments along with 12%
interest
per annum turn, down payment is ` 25,000.
(iii) Alok hires out the truck to Anurag for a monthly hire of ` 3,000 p.m. from 1st January 1990.
(iv) The hire charges are to be adjusted at the end of each year, against the amount due to
Anurag on account of principal and interest any difference being settled in cash. Alok
charges 10% depreciation (on the written – down-value method) on the truck.
(v) All payments are made as per the agreements. On 1st January 1993, the truck is sold by Alok
to Anurag for ` 20,000 prepare the interest Account and Anurag’s Account.
Solution
Books of Alok Dr. Truck Account Cr.
Date Particulars (`) Date Particulars (`)
1.1.90 To Anurag A/c 1,00,000 31.12.90 By Depreciation A/c 10,000
By Balance c/d 90,000
1,00,000 1,00,000
1.1.91 To Balance b/d 90,000 31.12.91 By Depreciation A/c 9,000
By Balance c/d 81,000
90,000 90,000
1.1.91 To Balance b/d 81,000 31.12.92 By Depreciation A/c 8,100
By Balance c/d 72,900
81,000 81,000
1.1.93 To Balance b/d 72,900 1.1.93 By Cash A/c 20,000
By Loss on sale of Truck 52,900
72,900 72,900
Page 16
Topper’s Institute Hire-Purchase 6.16
Dr. Interest Suspense Account Cr.
Date Particulars (`) Date Particulars (`)
1.1.90 To Anurag 18,000 31.12.90 By Interest A/c 9,000
By Balance c/d 9,000
18,000 18,000
1.1.91 To Balance b/d 9,000 31.12.91 By Interest A/c 6,000
By Balance c/d 3,000
9,000 9,000
1.1.91 To Balance b/d 3,000 31.12.92 By Interest A/c 3,000
3,000 3,000
Dr. Hire Charges Account
Cr.
Date Particulars (`) Date Particulars (`)
31.12.90 To P & L A/c 36,000 31.12.90 By Anurag 36,000
36,000 36,000
31.12.91 To P & L A/c 36,000 31.12.91 By Anurag 36,000
36,000 36,000
31.12.91 To P & L A/c 36,000 31.12.92 By Anurag 36,000
36,000 36,000
Dr. Interest Account Cr.
Date Particulars (`) Date Particulars (`)
31.12.90 To Interest Suspense A/c 9,000 31.12.90 By P & L A/c 9,000
9,000 9,000
31.12.91 To Interest Suspense A/c 6,000 31.12.91 By P & L A/c 6,000
6,000 6,000
31.12.91 To Interest Suspense A/c 3,000 31.12.92 By P & L A/c 3,000
3,000 3,000
Dr. Anurag’s Account Cr.
Date Particulars (`) Date Particulars (`)
1.1.90 To Bank A/c 25,000 31.12.90 By Trukc A/c 1,00,000
31.12.90 To Hire Charges A/c 36,000 By Interest Suspense A/c 18,000
To Balance c/d 59,000 By Bank A/c 2,000
1,20,000 1,20,000
31.12.91 To Hire Charges A/c 36,000 1.1.91 By Balance b/d 59,000
To Balance c/d 28,000 31.12.91 By Bank A/c 5,000
64,000 64,000
31.12.92 To Hire Charges A/c 36,000 1.1.92 By Balance b/d 28,000
31.12.92 By Bank A/c 8,000
36,000 36,000
Problem 19.
ABC associates entered into a financial agreement on 1.4.2001 with Flexible leasing Ltd. For lease
of car. The price of the car was ` 2,00,000 and the quarterly lease rentals were agreed to ` 90 per
thousand payable at the beginning of every quarter. ABC associates kept up their payments but by
25.3.2002 they approached and obtained the consent of the leasing company for treating
Page 17
Topper’s Institute Hire-Purchase 6.17
arrangement as one of Hire-Purchase from the beginning on the following terms:
Period 3 years
Quarterly then : ` 30,000 payable at the beginning of the quarter.
It was agree that the lease rentals paid will be treated as hire monies and that the balance due up
to 31.3.2002 will be settled by ABC Associates on that date with interest at 18% p.a. on various
installment due during the year. The rate of depreciation on the car is 25%.
Required: Showing the following A/c in the books of ABC associates for the year 2001-02:
Flexible Leasing Ltd’s A/c and. Interest Suspense A/c. [Nov – 1996]
Solution Lease rental = 000,1
90000,00,2
= 18,000/quarterly
1.4 = 18,000
1.7 = 18,000
1.10 = 18,000
1.1 = 18,000
25.3 =
1.4 =
Lease Rent A/c…………………….Dr. 18,000
To Bank A/c 18,000
Car A/c……………………………..Dr. 2,00,000
Interest Suspense A/c……………..Dr. 1,60,000
To H.V. A/c 3,60,000
Car A/c
Date Particulars ` Date Particulars `
25.3 To F.L. Ltd. A/c 2,00,000 31.3 By Dep.
(2,00,000 × 25%)
By c/d
50,000
1,50,000
2,00,000 2,00,000
Flexible Leasing Limited Account
Date Particulars (`) Date Particulars (`)
25.3.2002 To Lease Rental A/c 72,000 25.3.2002 By Car on hire Purchase A/c 2,00,000
31.3.2002 To Bank A/c (48,000 + 5,400) 53,400 25.3.2002 By Interest Suspense A/c 1,60,000
31.3.2002 To Balance c/d 2,40,000 31.3.2002 By Additional Interest A/c 5,400
3,65,400 3,65,400
Page 18
Topper’s Institute Hire-Purchase 6.18
Dr. Interest Suspense Account Cr.
Date Particulars (`) Date Particulars (`)
25.3.2002 To Flexible Leasing Ltd. 1,60,000 31.3.2002 By Interest on H.P. A/c 92,121
31.3.2002 By Balance c/d 67,879
1,60,000 1,60,000
Working Notes
(i) Calculation of Balance Payable on 31st March, 2002 and the Amount of Interest
Date Quarterly Hire Charges
Rs.
Quarterly Lease
Rentals Paid (`)
Difference Payable (`)
Interest @ 18% p.a. Amount to Interest (`) From To
01.04.2001
01.07.2001
01.10.2001
01.01.2002
30,000
30,000
30,000
30,000
18,000
18,000
18,000
18,000
72,000
12,000
12,000
12,000
12,000
48,000
01.04.2001
01.07.2001
01.10.2001
01.01.2002
31.03.2002
31.03.2002
31.03.2002
31.03.2002
2,160
1,620
1,080
540
5,400
Amount Payable on 31st March, 2002 (`)
Balance due 48,000
Interest due 5,400
53,400
(ii) Ascertainment of Total Amount of Interest on Hire Purchase (`)
Hire Purchase Price of the car 3,60,000
(` 30,000 12 installments
Less: Cash Price (2,00,000)
Total: Amount of Interest 1,60,000
(vi) Calculation of Interest on Hire Purchase Attributable to the year 2001 – 2002
Date Interest Calculation (`)
1.4.2001 26,667
1.7.2001 24,242
1.10.2001 21,818
1.1.2002 19,394
92,121
Problem 20.
A manufacturing company purchased machinery on hire-purchase basis on 1st June, 1990. Soon
after the installation the machine was giving trouble and finally broke on 14 th August, 1990. The
1,60,000 11
66
1,60,000 10
66
1,60,000 9
66
1,60,000 8
66
Page 19
Topper’s Institute Hire-Purchase 6.19
suppliers agreed to replace the machine. A new agreement was signed for that purpose and a sum
of ` 500 was paid for cancelling the first agreement by the manufacturing company. The following
are the necessary particulars:
1st Machine 2nd Machine
1. Date of Purchase 1.6.1990 31.8.1990
2. Cash Price 35,000 42,860
3. Initial Payment 6,920 ––
4. Allowance for payments made under cancelled agreement –– 9,500
5. Hire charges 3,240 3,840
6. Hire-Purchase Price 38,240 46,700
7. Number of installments 18 24
8. Installment payable every month commencing on 1.7.1990 1.10.1990
9. All payment were made on due dates
9. Ignore depreciation on machinery
You have to prepare the following Ledger Accounts in the books of the manufacturing company for the year ending 31st March, 1991:
(a) Machinery on H.P. A/c,
(b) Hire-Purchase Company’s A/c,
(c) Hire-Purchase Disposal A/c, and
(d) Hire-Purchase Interest Suspense A/c
Solution
Dr. Machinery Account
Cr.
Date Particulars (`) Date Particulars (`)
1.6.90 To Hire-Purchase 14.8.90 By H.P. (Machine) 35,000
Company's A/c 35,000 Disposal A/c
31.8.90 To Hire-Purchase By Dep. -
Company's A/c 42,860 31.3.91 By Balance c/d 42,860
77,860 77,860
Statement of Installment
Particulars 1st Machine 2nd Machine
Cash price
Less: D.P.
Less: Allowance for 1st machine
Balance
+ Hire-charges (Interest)
No. of Installment
Amount of installment
35,000
6,920
42,860
9,500
28,080
3,240
33,360
3,840
31,320
÷ 18
37,200
24
1,740 1,550
Page 20
Topper’s Institute Hire-Purchase 6.20
Interest Suspense Account
Date Particulars ` Date Particulars `
1.6
31.8
To H.P.C.
To H.P.C.
3,240
3,840
1.7.90
1.8.90
14.8
1.10
1.11
1.12
1.1
1.2
1.3
By Interest A/c (3,240 × 18/171)
By Interest A/c (3,240 × 17/171)
By Interest A/c (3,240 × 16/171 ×
14/31)
By H.P. C. (unexpired)
By Interest (3,840 × 24/300)
By Interest (3,840 × 23/300)
By Interest (3,840 × 22/300)
By Interest (3,840 × 21/300)
By Interest (3,840 × 20/300)
By Interest (3,840 × 19/300)
By Interest (3,840 × 18/300)
(Accrue but not due)
By c/d
341
322
137
2,440
307
294
282
269
256
243
230
1,959
7,080 7,080
Dr. Hire-Purchase Company Account
Cr.
Date Particulars (`) Date Particulars (`)
1.6.90 To Bank 6,920 1.6.90 By Machinery on Hire-
1.7.90 To Bank 1,740 Purchase A/c 35,000
1.8.90 To Bank 1,740 By H.P. Interest
14.8.90 To H.P. Interest 2,440 Suspense A/c 3,240
Machinery
Suspense Account
(amount written back)
To H.P. (Machine) 25,400
Disposal A/c (B.f.)
38,240 38,240
31.8.90 To Allowance 9,500 31.8.90 By Machinery on H.P. A/c 42,860
31.3.91 By H.P. Interest
1.10.90 To Bank 1,550 Suspense A/c 3,840
1.10.90 To Bank 1,550
1.10.90 To Bank 1,550
1.1.91 To Bank 1,550
1.2.91 To Bank 1,550
1.3.91 To Bank 1,550
31.3.91 To Balance c/d 27,900
46,700 46,700
Page 21
Topper’s Institute Hire-Purchase 6.21
Dr. H.P. Disposal Account
Cr.
Date Particulars (`) Date Particulars (`)
14.8.90 To Machinery on hire- 14.8.90 By Hire-Purchase Co. A/c 25,400
purchase A/c 35,000 31.8.90 By Hire-Purchase Co. A/c
To Bank (cancellation (allowance) 9,500
charges) 500 By Profit & Loss A/c 600
35,500 35,500
Problem 21.
Happy Valley florists Ltd. acquired a delivery van on hire purchase on 01.04.2010 from Ganesh
Enterprises. The terms were as follows:
Particulars Amount (` )
Hire Purchase Price 1,80,000
Down Payment 30,000
1st installment payable after 1 year 50,000
2nd installment after 2 years 50,000
3rd installment after 3 years 30,000
4th installment after 4 years 20,000
Cash price of van ` 150,000 and depreciation is charged at 10% WDV.
You are required to
(i) Calculate Total Interest and Interest included in each installment.
(ii) Prepare Van-A/c, Ganesh Enterprises A/c in the books of Happy Valley Florists
Ltd. up to 31.03.2014.
[May-2014, 8 Marks]
Solution Van A/c
Date Particulars Amount Date Particulars Amount
1.4.10 To Ganesh enterprises 1,50,000 31.3.11
31.3.11
By Depreciation A/c
By Balance c/d
15,000
1,35,000
1,50,000 1,50,000
1.4.11 To balance c/d 1,35,000 31.3.12
31.3.12
By Depreciation
By balance c/d
13,500
1,21,500
1,35,000 1,35,000
1.4.12 To balance c/d 1,21,500 31.3.13
31.3.13
By Depreciation
By balance c/d
12,150
1,09,350
1,21,500 1,21,500
1.4.14 To balance c/d 1,09,350 31.314 By Depreciation
By balance c/d
10,935
98,415
1,09,350 1,09,350
Page 22
Topper’s Institute Hire-Purchase 6.22
Computation of interest :-
Hire purchase price 1,80,000
Cash price 1,50,000
Interest 30,000
Division of interest included in each installments:-
No .of years Hire purchase price at the beginning of Ratio Interest = Total interest × ratio
1
2
3
4
H.P. Price 1,80,000
(-) Down payment 30,000
Hire purchase o/s at the beginning of 1st yr
150000
1,00,000
5,00,000
20,000
15
10
5
2
30,000×15/32 = 14062.5
30,000×10/32 = 9375
30,000×5/32 = 4687.5
30,000×2/32 = 1875
32 30,000
Ganesh Enterprises A/c
Date Particulars Amount Date Particulars Amount
1.4.10
31.3.11
To bank A/c
To bank A/c
To balance c/d
30,000
50,000
84,062.5
1.4.10
31.3.11
By Assets A/c
By interest
1,50,000
1,4062.5
1,64,062.5 1,64,062.5
1.4.11
31.3.12
To bank
To balance c/d
50,000
4,3437.5
1.4.11
31.3.12
By balance b/d
By interest
84,062.5
9,375
93,437.5 93,437.5
31.3.13 To bank A/c
To balance c/d
30,000
18,125
1.4.12 By balance b/d
By interest
43,437.5
4,687.5
48,125 4,8125
31.3.14 To bank A/c 20,000 1.4.14 By balance c/d
By interest
18,125
1,875
20,000 20,000
Problem 22.
Lucky bought 2 tractors from Happy on 1.10.11 on the following terms:
`
Down payment 5,00,000
1st installment at the end of first year 2,65,000
2nd installment at the of 2nd year 2,45,000
3rd installment at the end of 3rd year 2,75,000
Interest is charged at 10% per annum Lucky provides depreciation @ 20% on diminishing balances.
On 30.09.14 lucky failed to pay the 3 rd installment upon which Happy repossessed 1 tractor.
Happy agreed to leave 1 tractor with lucky and adjusted the value of the tractor against the
amount due. The tractor taken over was valued on the basis of 30% depreciation annually on
written down basis. The balance amount remaining in the vendor’s account after the above
Page 23
Topper’s Institute Hire-Purchase 6.23
adjustment was paid by Lucky after 3 months with interest @ 18% p.a.
You are required to:
(1) Calculate the cash price of the tractors and the interest paid with each installment.
(2) Prepare Tractor Account and Happy Account in the books of Lucky assuming that books
are closed on September 30 every year. Figure may be rounded off to the nearest rupee.
[May-2015, 8 Marks]
Solution 1. Statement of Cash Price of the Assets acquired on HP
End of Installment
Balance due after
Installment
Installment Amount
Cumulative Amount
Interest at 10% p.a
Paid for principal
(1) (2) (3) (4)= (2) + (5) (5)=
110
10)4(
(6)= (3)-(5)
3
2
1
0
Nil
2,50,000
4,50,000
6,50,000
2,75,000
2,45,000
2,65,000
5,00,000
2,75,000
4,95,000
7,15,000
11,50,000
25,000
45,000
65,000
Nil
2,50,000
2,00,000
2,00,000
Down payment 5,00,000
12,85,000 1,35,000 11,50,000
Thus, Cash price of the Assets = ` 11,50,000
2. Tractor A/c
Date Particulars ` Date Particulars `
01.10.11
01.10.11
To bank A/c (Down
payment)
To Happy A/c
5,00,000
6,50,000
30.09.12
30.09.12
By depreciation (11,50,000 x 20%)
By balance c/d
2,30,000
9,20,000
Total 11,50,000 Total 11,50,000
01.10.12 To balance b/d 9,20,000 30.09.13
30.09.13
By Depreciation (9,20,000 x 20%)
By balance c/d
1,84,000
7,36,000
Total 9,20,000 Total 9,20,000
01.10.13 To balance b/d 7,36,000 30.09.14
30.09.14
30,09,14
By Depreciation (7,36,000 x 20%)
By Happy
%70%70%70
2
000,50,11
By Loss on takeover (Bal. figure) or
[(1/2 of 5,88,800)2,94,400-1,97,225]
By balance c/d
1,47,200
1,97,225
97,175
2,94,400
Total 5,88,800 Total 5,88,800
01.10.14 To balance b/d 2,94,400 30.09.15 By Depreciation (2,94,400 × 20%)
By balance c/d
58,880
2,35,520
Total 2,94,400 Total 2,94,400
Note: Computation of Takeover Value of Tractor
Page 24
Topper’s Institute Hire-Purchase 6.24
Particulars `
Cost of the Tractor (1 Tractor) 11,50,000/2
Depreciation for Year 1 5,75,000 × 30%
Depreciation for Year 2 (5,75,000 – 1,72,500)= 4,02,500 × 30%
Depreciation for Year 3 (4,02,500 – 1,20,750)= 2,81,750 × 30%
5,75,000
(1,72,500)
(1,20,750)
(84,525)
Takeover Value of Tractor 1,97,525
3. Happy A/c
Date Particulars ` Date Particulars `
30.09.12
30.09.12
To Bank A/c
To Balance c/d (bal. fig.)
2,65,000
4,50,000
01.10.11
01.10.11
By Tractor A/c
By interest (6,50,000 × 10%)
6,50,000
65,000
Total 7,15,000 Total 7,15,000
30.09.13
30.09.13
To Bank
To Balance c/d
2,45,000
2,50,000
01.10.12
01.10.12
By Balance b/d
By Interest
4,50,000
45,000
Total 4,95,000 Total 4,95,000
30.09.14
30.09.14
To Tractor A/c (takeover)
To Balance c/d
1,97,225
77,775
01.10.13
01.10.13
By Balance b/d
By Interest
2,50,000
25,000
Total 2,75,000 Total 2,75,000
31.12.14 To Bank A/c 81,275 01.10.14
31.12.14
By Balance b/d
By Interest (77,775 × 18% × 3/12)
77,775
3,500
Total 81,275 Total 81,275
Problem 23.
Girish Transport Ltd. purchased from NCR Motors 3 electric rickshaws costing ` 60,000 each on
the hire purchase system on 1.1.2013. Payment was to be made ` 30,000 down and the remainder
in 3 equal installments payable on 31.12.2013, 31.12.2014 and 31.12.2015 together with interest @
10% p.a. Girish Transport Ltd. writes off depreciation @ 20% p.a. on the reducing balance. It paid
the installment due at the end of 1st year i.e. 31.12.2013 but could not pay next on 31.12.2014. NCR
Motors agreed to leave one e-rickshaw with the purchaser on 31.12.2014 adjusting the value of the
other two e-rickshaws against the amount due on 31.12.2014. The e-rickshaws were valued on the
basis of 30% depreciation annually on WDV basis.
Show the necessary Ledger accounts in the, books of Girish Transport Ltd. for the year 2013, 2014
and 2015.
Solution
1. Rickshaw A/c
Date Particulars ` Date Particulars `
01.01.13 To NCR Motors
A/c
1,80,000 31.12.13 By Depreciation (1,80,000 × 20%) 36,000
31.12.13 By balance c/d 1,44,000
Total 1,80,000 Total 1,80,000
01.01.14 To balance b/d 1,44,000 31.12.14 By Depreciation (1,44,000 × 20%) 28,800
By NCR Motors (WN 2) 58,800
By Loss on Takeover (WN 3) 18,000 By balance c/d
(b/f)
38,400
Total 1,44,000 Total 1,44,000
01.01.15 To balance b/d 38,400 31.12.15 By Depreciation (38,400 × 20%) 7,680
Page 25
Topper’s Institute Hire-Purchase 6.25
By balance c/d
(b/f)
30,720 Total 38,400 Total 38,400
NCR Motors A/c
Date Particulars ` Date Particulars `
01.01.13 To Bank A/c 30,000 01.01.13 By Rickshaw A/c 1,80,000
31.12.13 To Bank A/c [50,000 +
15,000]
65,000 31.12.13 By Interest A/c [1,80,000 - 30,000 × 10% 15,000
31.12.13 To balance c/d (b/f) 1,00,000 Total 1,95,000 Total 1,95,000
31.12.14 To Rickshaw A/c 58,800 01.01.14 By balance b/d 1,00,000
31.12.14 To balance c/d 51,200 31.12.14 By Interest A/c (1,00,000 × 10%] 10,000 1,10,000 1,10,000
31.12.15 To Bank A/c (Note) 56,320 01.01.15 By balance b/d 51,200
31.12.15 By Interest A/c [51,200 × 10%] 5,120 Total 56,320 . Total 56,320
Note: It is assumed that the balance amount is settled along with interest, on 31.12.2015.
Working Notes: 1. Valuation of Rickshaw
Particulars Value as per purchaser
Purchaser
Value as per Vendor
Depreciation Rate 20% WDV 30% WDV
Value of Rickshaw [60,000 x 3] 1,80,000 1,80,000
Less, Depreciation for the year 2013 (36,000) (54,000)
Value of Rickshaw as on 31.12.2013 1,44,000 1,26,000
Less: Depreciation for the year 2014 (28,800) (37,800)
Value of Rickshaw as on 31.12.2014 1,15,200 88,200 Less, Value of Rickshaws repossessed [1,15,200 ×
2/3]
(76,800)
Price of the Remaining Rickshaw [1,15,200
×1/3]
38,400
Less: Depreciation for the year 2015 (7,680)
Value of Rickshaw as on 31.12.2015 30,720
Takeover Value of Rickshaws repossessed: 2/3 × ` 88,200 = ` 58,800
Loss on Takeover = Book Value of Rickshaws Repossessed f 76,800 (-) Takeover Value ` 58,800 = `
18,000.
Problem 24.
What are the differences between Hire Purchase and Installment System?
[Nov-2014, 4 Marks]
Solution
The differences between hire purchase and installment system are as follows:
Basis of Distinction Hire Purchase Agreement Installment system
1. Act governing It is governed by Hire Purchase
Act 1972
It is governed by sale of Goods Act
1930
2. Nature of contract It is an agreement of hiring It is an agreement of sale
3. Passing of title
(ownership)
The title of goods passes on last
payment
The title of goods passes
immediately as in the case of usual
sale
Page 26
Topper’s Institute Hire-Purchase 6.26
4. Right to return
goods
The hirer may return goods
without further payment, except
for accrued installment.
Unless seller defaults, goods are
not returned.
Problem 25.
Srikumar bought 2 cars from 'Fair Value Motors Pvt. Ltd. on 1-4-2012 on the following terms:
Down payment 6,00,000
1st Installment at the end of first year 4,20,000
2nd Installment at the end of 2nd year 4,90,000
3rd Installment at the end of 3rd year 5,50,000
Interest is charged at 10% p.a.
Srikumar provides depreciation @ 25% on the diminishing balances.
On 31-3-15 Srikumar failed to pay the 3rd installment upon which 'Fair Value Motors Pvt Ltd.
repossessed 1 car. Srikumar agreed to leave one car with Fair Value Motors Pvt Ltd. and adjusted
the value of the car against the amount due. The car taken over was valued on the basis of 40%
depreciation annually on written down basis. The balance amount remaining in the vendor's
account after the above adjustment was paid by Srikumar after 3 months with interest @ 20% p.a.
You are required to :
(i) Calculate the cash of the cars and the interest paid with each installment.
(ii) Prepare Car Account and Fair Value Motors Pvt Ltd. Account in the books of Srikumar
assuming books are closed on March 31, every year. Figures may be rounded off to the
nearest rupee.
[Nov-2016, 8 Marks]
Solution
(i) Calculation of Interest and Cash Price
No. of
Installments
Outstanding
Balance at the
end after the
payment of
installment
Amount due of
the time of
installment
Outstanding
balance at the
end before the
payment of
installment
Interest Outstanding
balance at the
beginning
[1] [2] [3] [4] = 2 + 3 [5] =
4×10/110
[6] = 4-5
3rd
2nd
1st
-
5,00,000
9,00,000
5,50,000
4,90,000
4,20,000
5,50,000
9,90,000
13,20,000
50,000
90,000
1,20,000
5,00,000
9,00,000
12,00,000
Total cash price = Rs.12,00,000 + 6,00,000 (down payment) = ` 18,00,000.
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Topper’s Institute Hire-Purchase 6.27
(ii) In the books of Srikumar Cars Account
Date Particulars ` Date Particulars `
1.4.2012 To fair Value Motors a/c 18,00,000 31.3.2013 By Depreciation A/c
By Balance c/d
4,50,000
13,50,000
18,00,000 18,00,000
1.4.2013 To Balance b/d 13,50,000 31.3.2014 By Depreciation A/c
By Balance c/d
3,37,500
10,12,500
13,50,000 13,50,000
1.4.2014 To Balance b/d 10,12,500 31.3.2015 By Depreciation A/c
By Fair Value Motors a/c
(Value of 1 Car taken over
after depreciation for 3 years
@40% p.a.)
[9,00,000 – (3,60,000 +
2,16,000 + 1,29,600)]
By Loss transferred to Profit
and Loss a/c on surrender
(Bal. fig.)
By Balance c/d
½ (10,12,500 – 2,53,125)
2,53,125
1,94,400
1,85,288*
3,79,687*
10,12,500 10,12,500
*May be rounded off as ` 1,85,287. In that case, the balance in Cars account will be ` 3,79,688.
Fair value Motors Pvt. Ltd.
Date Particulars ` Date Particulars `
1.4.12
31.3.13
To Bank (down payment)
To Bank (1st Installment)
To Balance c/d
6,00,000
4,20,000
9,00,000
1.4.12
31.3.13
By Cars a/c
By Interest a/c
18,00,000
1,20,000
19,20,000 19,20,000
31.3.14 To Bank (2nd Installment)
To Balance c/d
4,90,000
5,00,000
1.4.13
31.3.14
By Balance b/d
By Interest A/c
9,00,000
90,000
9,90,000 9,90,000
31.3.15 To Car A/c
To Balance c/d
1,94,400
3,55,600
1.4.14
31.3.15
By Balance b/d
By Interest A/c
5,00,000
50,000
5,50,000 5,50,000
30.6.15 To Bank (Amount settled after 3
months)
3,73,380 1.4.15
30.6.15
By Balance b/d
By Interest A/c @ 20% on
bal.)
100
20
12
3600,55,3
3,55,600
17,780
3,73,380 3,73,380
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Topper’s Institute Hire-Purchase 6.28