CHAPTER 1

HIRE PURCHASE SYSTEM AND INSTALMENT

SYSTEM
High value of durable goods are sold under Higher purchase system
and instalment system.
Goods or Assets may be purchased for cash or on credit. f goods
or assets are purchased on credit, some times the seller may allow the
purchaser to repay the amount in different instalments. Two methods are
followed in repayment of amount.
They are:
i) Hire purchase system.
Instalment system.

Hire purchase system:

Hire purchase system is one in which the possession of the asset
is transferredto the Hire Purchaser at the time of entering into the contract
of Hire purchase. Ownership of the asset is transferred to the Hire purchaser
onlywhen the last instalment is paid by the purchaser. If defauit arises in
payment of any instalment, then the Hire vendor has the right to repossess
the asset sold to the Hire purchaser. In such acase, amount paid by the
Hire purchaser will be treated as a Hire charge for the asset used by the
Hire purchaser. As the amount paid by the purchaser is treated as a hire
charge, in case of default to pay any instalment, the entire amount paid by
purchase is
the hire purchaser is treated as hire charges. This method of
called as Hire purchase system.

Products that are sold :

durable
Television set, Tape recorder, machinery, Trucks, Articles of
nature may be purchased under hire system. 2(C) Hire
According to the Hire Purchase Act 1972 Section
goods are let on hire
purchase agreement is an agreement under which
them inaccordance
and underwhich the hire has an option to purchase
agreement underwhich
With the termsof the agreement and includes an
 1.2 Financial Accounting 1.3 Hire Purchase & Instalment System
delivered by the owner thereof to
) Possession of goods is amount in Rs. 15000.
person on condition that
such person pays the agreed periodical In order to repossess the stock in the above circumstances, the
instalments. hire vendor has to get an order from a court.
on the
ii) The property in the goods is to pass such person ii) The hire vendor has the right to treat the amount paid by the hire
instalments
payment of the last of such purchaser as hire charges when goods are repossessed.
ii) Such person has a right to terminate at any time before the
property sO passes".
Rights of a hire purchaser under hire purchase system:
The following are the rights of a hire purchaser.
Features of Hire purchase system : i) The purchaser has the rights to get a statement of account from
The special features of a Hire purchase system are given below. the vendor for the goods purchased by him.
i) Goods are purchased under a contract of Hire purchase. i) When the goods are rep0Ssessed, if the hire purchaser has paid
ii) The amount of purchase may be paid in different instalments. higher amount than the hire purchase price of the goods, then the purchaser
ii) The possession of the asset is transferred to the Hire purchaser has the right to get back the excess amount paid by hím.
after signing the contract of Hire purchase. e.g) A purchased 5 trucks at a price of Rs.20,000 each on
v) Ownership of the asset is transfered only when the last instalment hire purchase system. On signing the agreement, he paid Rs.10,000 and
is paid by the Hire purchaser. agreed to pay the remaining balance in five equal instalments of Rs.
) If default arises in payment of any instalment, then the entire 18,000 each.
amount paid by the purchaser will be treated as hire charges. Apaid three instalments only and he did not pay the remaining
vi) In case of defaut in the payment of any instalment, the hire vendor two instalments. The vendor repossessed 2 trucks.
has the right to repossess the asset. In this example Apaid Rs. 64000(10,000 +3 x18,000). The value
v)) The contract of agreement must be made in writing. of 3 trucks is Rs. 60,000 (3 x 20,000). He has paid Rs. 4000 excess. The
vii) The contract of Hire purchase must be signed by the parties hire purchaser (A) has the right to get back Rs. 4000from the hire vendor.
involved in the contract.
ix) The down payment, number of instalments, rate of interest and Important terms in the Hire Purchase System :
other conditions must be stated in the contract of Hire purchase. 1) Down payment:
When goods are purchased under hire purchase system, the hire
Rights of a Vendor under Hire purchase system: purchaser has to pay specified sum of money on signing the contract. The
The folowing are the rights of a Hire Vendor. amount paid at the time of signing the contract is known as down payment.
i) AHire Vendor has the right to repossess the stock when the Hire The hire purchaser may possess the goods after making the down payment.
purchaser makes default in payment of instalment. But before Some times, the hire endor may allow the hire purchaser to possess the
repossession, the hire vendor has to give a written notice to the hire goods even without making the down payment.
purchaser. Down payment is the part of Hire Purchase price.
i) The hire vendor has no right to repossess the stock in the following 2) Cash price :
circumstances. It is the price for which the articles are sold for cash immediately.
a) The half of the price of the goods sold is less than Rs. 5000 3) Hire purchase price :
b) The (3/4) three-fourths of the price of the goods is less than It is the total amount payable by the Hire purchase under a hire
 1.4 Financial Accounting
purchase agreement for the goods purchased. Hire purchase price includ. 1.5 Hire Purchase & Instalment
cash price and interest. System
Differences between a hire purchase system and an instalment
4) Hirer:
system:
It means the person who buys goods under Hire purchas Nov.2021)
agreement. (M.S.University, Nov.2017, Nov.2019,
5) Hire : Hire purchase system Instalment system
t means the amount payable by the Hire purchaser periodical
are sold As soon as the goods are sold
under hire purchase agreement. i) As soon as the goods
6) Hire vendor : possession of the goods is possession and ownership
transferred to the buyer. of the goods are transferred
It means the person who sells goods under hire purchas:
agreement. He is also called as the owner on the goods sold. Ownership of the goods is not to the purchaser.
transferred.

Contents of Hire purchase agreement: ii) Ownership of the asset or goods Ownership is transferred as soon
Every Hire purchase agreernent must be in writing and signed b is transfered only on payment as the goods are sold.
al the parties involved in the agreement. of last instalment.
Section 4 of the Act describe the contents of the agreement. The
are ü) If any default arises in payment If any defautt arises in payment

1) The hire purchase price of the goods to which the agreemer of instalment, the buyer has the of instalment the buyer has no
relates. right to repossess the asset right to repossess the asset or
or goods. goods.
2) Cash price of the goods to which the agreement relates.
3) The date on which the agreement shall be deemed t The buver has the right to retum The buyer has no right to retum
have commenced. the goods to the seller. the goods to the seller.
4) The number of instalments by which the hire purchase prics
v) If any default arises in payment It is not so.
is to be paid.
of instalment, the entire amount
5) The goods to which the agreement relates, in the manner
paid by the purchaser will be
sufficient to identify them.
Instalment system : treated as hire charge only.
Instalment system is a system of purchase in which vi) The buyer cannot sel or mortgage The buyer can sell or mortgage
i) The ownership and possession of the asset is transferred the asset before the payment the asset after payment of the
immediately after the contract is made. of the last instalment. down payment.
ii) The amount may be paid in different instalments. The contract is made on the basis
) The contract is made on the
ln) Tne vendor has no right to repossess the asset if default arises basis of hire of goods. of sale of goods.
in payment of any instalment.
iv) The buyer cannot return the asset to the vendor unless othe|vii) Hire purchaser is just like a bailee. The buyer is the Owner.
wise agreed.
D) It is governed by Hire Purchase Act It is governed by the Sale of Goods
) Interest is charged on unpaid balance. 1972. Act 1932.
 1.6 Financial Accountingi 1.7 Mire Purchase &Instalment System
The parties are called as buye - Rs. 50,000
called hirer and the Cash price of the asset
x) The buyer is and seller. p.a.
seller is called Hire
vendor. Rate of interest - 5%
The buyer can not terminate tho Down payment Rs. 10,000 10,000
xi) The hirer can
terminate the Instalment amount at the end of I year - Rs.
contract.
end of I year - Rs. 20,000
agreement. lInstalment amount at the
lll year - Rs. 14,250
I| Instalment amount at the end of
interest : each year: Rs.
Methods to calculate
available to calculate
interest: Answer: Calculation of interest for 50,000
Four methods are price
and instalment amount are otal cash
1) When rate of interest, total cash price Less: Down payment 10,000
40,000
given. Balance due of the begining of Iyear
2)When rate of interest is not given Less :I Instalment 10,000
3) When cash price is not given. Less : Interest 2.000 8,000
method.
4) Calculation of cash price by annuity
32,000
Balance due at the begining of Iyear 20,000
-Less: I| Instalment
price and instalment are given
1)When rate of interest, total cash Less: Interest 1600 18400
Problem . purchase system. The
13,600
On 1.1.2016, A purchased machinery on hire contract) and ir Less : III Instalment
14,250
4000 down (on signing of the 13.600
payment is to be made Rs. Rs.2,000 at the end of firS Less : Interest ( 14,250 - 13,600) 650
6,000, Rs. 5,000 and
three instalments of Rs. Balance due
third years respectively. The cash price of the machinery is
,second and Problem :3s
p.a. Calculate the interest in eact on Hire Purchase basis.
Rs. 15.980and the rate of interest is 5% Amachine costing Rs.50,000 was purchased
and the balance in four
year's instalment.
Rs. Rs. Rs. 10,000 was paid on signing the agreement
Answer: Calculation of interest with interest at 5%. Calculate
15,980 equal instalments of Rs.10,000 each annually instalment.
Total cash price of the asset interest and show the amount payable on each
4.000
Less : Down payment (M.S.University, April 2020)
11,980 Rs.
Balance due at the begining of lyear
6,000 Answer: Calculation of interest for each year : 50,000
Less : First instalment
599 5,401 Total cash price 10.000
Less : Interest for I year Less : Down payment
6,579 40,000
Balance due at the beginning of ll year Balance due of the beginning of I year
Less : Second instalment 5,000 Less :| Instalment 10,000
329 4.671 2,000 10,000
Less : Interest for ll year
1,908
Interest on Rs.40,000 for lyear 30,000
Balance due at the end of Ill year Balance due at the beginning of Il year
Less: Third Instalment 2,000 10,000
Less : Il Instalment 10,000
Less: lnterest 92 1,908 1,500
i3 nterest on Rs.30,000 for ll year 20,000
NIL
Balance due Balance due at the beginning of ll year 10,000
Less: III Instalment
10,000
Problem( : / Interest on Rs.20,000 for ll year
1,000
Calculate interest from the following details.
 1.8 Financlal Accounting |
10,000 1.9 Hire Purchase &Instalment System
10,000 Answer : Rs.
00 10.000 Total Hire purchase price = 8,000 + 4x 8,000
Interest o As 10,00 for tver = 8,000 + 32,000 = 40,000
Nil
Less : Total cash price 36,000
Note: In this rotlem interest is paid along with installment. Hen. Total interest
the installment. 4.000
intst lement is not deducted from
Calculation of interest for each year :
I. When rate of interest is not given : Year Amount due Ratio Interest
Problem 32,000 4
Mr. Xpurhased a machine on hire purchase system Rs.3,000
1 4,000 x 4/10 = 1,600
2 24,000 3 4,000 x 3/10 = 1.200
being neid on delhvery and the balance in five installments of Rs.6,00: 16,000 2
3 4,000 x 2/10 = 800
an payable annualy on 31st December. The cash price of the machin,
8,000 1 4,000 x 1/10 = 400
wS R& 0, 000. Calculate the amount of Interest for each year. 10
(M.S.University, Nov. 2018) 4.000
Problem:6
Answer:
The cash price of a scooter is Rs. 30,000. The Hire Purchase
Year Amount due Rs Ratio Interest Rs.
Price is Rs. 36,000. No down payment. But payable in three equal annual
30,000 5 3,000 x 5/15 = 1,000 instalments. Calculate the interest for each year.
2 24,000 3,000 x 4/15 = 800 (M.S.University, April 2002)
18,000 3 3,000 x 3/15 = 600
12,000 2 3,000 x 2/15 = 400 Answer : Calculation of interest:
5 6,000 3,000 x 1/15 = Total Hire Purchase price = Rs. 36,000
200
15 3,000 Less: Cash price = Rs. 30,000
Total interest for 3 years. = Rs. 6,000
Total Hire purchase cash price of the computer 33,000
Less : Down payment Year Amount due Ratio Interest
3,000
Amount due at the end of l year 30,000 Rs. Rs.
Totai Hire purchase price 33,000 1 36,000 3 3,000
Less : Cash price 30,000 2 24,000 2 2,000
Total Interest for 5 years 33000 3,000 3 12,000 1 1.000
Problem 30000 6,000
When cash price is not given :
Mr. A. prchased a machine under hire
purchase agreement, the cas"
price of the machine being Rs. 36,000. As per Problem :
the terms, the buyer has t Afinpurchased a machinery on 1.7.2000 on hire purchase system.
pay Rs. 8,000 on signing the agreement and the
of Rs. 8,000 each, payable at the end of each balance four instalment It immediately paid Rs.20,000 as down payment and agreed to pay three
in
year. Calculate the interes more yearly instalments of Rs.16,400; Rs.14,880; and Rs. 12,600. The
chargeable at the end of each year. first instalment was paid on 30.06.2001. The vendor charged interest @
(M.S.University, Nov. 2017) 5% p.a. Calculate the cash price of the assets.
 1.10 Financial Accounting 1.11 Hire Purchase &Instalment System
Answer: Calculation of cash price Problem : 10

year Instalment
Interest Rs. Cash pric Apurchased a motor car on Hire purchase under Hire purchase
12,600 x 5/105 = 600 12,000 system. The payments were:
3 12,600
26,880 x 5/105 = 1,280 13,600 Down payment Rs. 5,000 and Rs. 8,000, Rs. 6,000,and Rs. 4.000
2 14,880
42,000 x 5/105 =2,000 14,400 at the end of 2nd year, 4 th year, and 6 th year respectively Calclate cash
16,400
1
Down payment 20,000 price of the motor car if
1 20,000 i) interest is charged by the vendor @10% at yeary rest on the urpaid
63,880 3,880 60,000
balance
i) Interest is charged by the vendor @10% p.a. two yearty rest.
Problem
17,20: Answer:
Amachine was purchased for a hire purchase price of Rs. i) Interest is charged at yearly rest: Rs.
Payment was made as follows. Rs. 4,000 at the time agreement, Rs Let the principal amount be 100
4.600 at the end of first year, Rs. 4,400 at the end of second year, R: Add: Interest for 1year 10
4.200 at the end of third year. Interest was charged at 5%. Calculate t-: Amount due at the end of Iyear 110
cash price of machine Add: Interest for lyear 11
(M.S.University, November 2019 ) Amount due to the end of ll year 121
Answer: Calculation of cash price Interest due at the end of l year 21
year Instalment Interest Rs. Cash pric:
3 4,200 4,200 x 5/105 = 200 4,000 Calculation of cash price of Motor car:
2 4,400 8,400 x 5/105 = 400 4,000 Year end Instalment amount Interest Cash price
1 4,600 12,600 x 5/105 = 600 4,000 4,000 x 21/121 = 694 3.306
6 4,000
4,000 Down payment 4.000 4 6,000 9,306 x 21/121 = 1,615 4,385
17.200 1,20016,000 2 8,000 15,691 x 21/121 = 2,723 5.277
Problem:9 5.000 5.000
Down payment
Calculate cash price of a machine from the folowing informaion 23.000 5.032 17.968
Down Payment Total
Rs.10,000
4 annual instalment at the end of each year Rs.10,000
Rate of interest Answer:
5% p.a
ii) Interest is charged at two yearly rest:
Year
(M.S.University, April 2020) Let the principal amount be Rs. 100
Insalment amount Interest Cash price
Rs. Rs.
Interest for 2 years= (100 x 10/100) x 2 = Rs. 20
Rs. Amount due at the end of Il year Rs.120
4 10,000 10,000 x5 /105 = 476 9,524 Calculation of cash price of the Motor Car
3 10,000 Cash price
19,524 x 5/105 = 930 9,070 Year end Instalment amount Interest
2 10,000 Rs.
28,594 x5/105 = 1,362| 8,633 Rs. Rs.
10,000 37,232 x 5/105 = 1,773| 8,227 4,000 x 20/120 = 667 3.333
pown payment 10,000 6 4,000
10,000 4 6,000 9,333 x 20/120 =1,556 4,444
Total 50.000
4.541 45,459
 1.12 Financial Accouning
15,777 x 20/120-2,630 5,370 1.13 Hire Purchase & Instalment System
2 8,000 (Being asset purchased under Hire purchase system)
5.000 5,000
Down payment 4,853 18,147 l2) Hire vendor alc Dr. XX

Total 23,000 To Bank XX

(Being down payment paid)

Annuity mathod: At the end of first and subsequent years:
Problem : systen for |1) Interest alc Dr. XX

On 1-1-2013,Mr.X bought machinery under Hire purchase To Hire vendor alc XX

Rs.60,000 payable by three equal instalments combining principal and (Being interest due)
later being a normal rate of 5% p.a. Calculate cash price of the
interest, the
years at 2) Hire vendor alc Dr XX

machinery. (The present value of an annuity of one rupee for three To Bank alc XX

5% is Rs.2.72325). (Beingfirst instalment amount paid)

Answer: 3) Depreciataion alc Dr XX

Instalment amount 60,000 + 3 = 20.000 ToAsset alc XX

Present value of annual = 20,000 x 2.72325 = Rs.54,465 (Being depreciation provided)
Cash price of the machinery = Rs.54,465 4) Proft and Loss alc Dr XX
Problem: 12 To Depreciation alc XX

Mr. Apurchases a machinery under Hire purchase system by annual To Interest alc XX

instalment of Rs.20,000 over a periodof 5years.The seller charges interest (Being amount transferred to profit and loss accoynt)
at 4% .p.a. on yearly balance. ( The present value of an annuity of one
rupee for 5 years at 4% is Rs.4.4518 ).Find out the cash price of the 2) Accrual method:
machinery. Under this method, the asset is deemed to be acquired gradually on
Answer: the basis of cash price. When instalments are paid, instalment is divided
Instalment amount Rs 20000 into two parts namely Interest and principal. The interest amount is debited
Present value - Rs 20000 x 4.4518 = Rs.89036 with interest account and the principal amount is debited with asset account.
Cash price of the machinery -Rs 89036. The amount of instalment is credited with hire vendor's account. When
instalment amount is paid, hire vendor account is debited and Bank account
Accounting Treatment : is credited.
The transactions under hire purchase may be recorded under two Journal entries:
methods: IAt the beginning of the first year :
1) Interest method Particulars Debit Credit
2) Accrual method Rs. Rs.
1) Interest method : Asset alc Dr XX

Journal entries in the books of Hire purchaser. To Hire vendor alc XX

Particulars Debit Credit (Being assets purchased)

Arthe beginning of the I year ji) Hire vendor alc Dr XX
) Asset alc To Bank alc XX
Dr. XX
To Hire vendor (Being down payment made)
XX
 1.14 Financial Accounting
year and subsequent years: 1.15 Hire Purchase & Instalment System
I At the end of the first instalments
i) nterest alc
Dr XX
Rs.60,000to be paid as Rs.15,000 down payment and 3 equal
is charged at 5% p.a.
ToHire vendor alc XX of Rs.15,000 each at the end of each year. Interest
line method.
(Being instalment due) The buyer depreciates the car at 10% p.a. on straight
Dr XX From the above particulars give journal entries in the books of Mr.P.
0) Hire vendor alc XX (Madras University, April2006, April2022)
To Bank alc Rs.
Answer Calculation of interest
Rs.
(Being instalment amount paid) Total cash price 56,000
M Depreciation alc Dr XX
15,000
XX Less : Down payment
To Asset alc 41,000
(Being depreciation provided) Balance due at the beginning of Iyear
Less :I Instalment 15,000
M) Profit and Loss alc Dr XX
12,950
Less : Interest 2.050
XX
To interest alc 28,050
XX Balance due at the beginning of Il year
To Depreciation alc Less : I Instalment 15,000
(Being depreciation and interest transferred) Less: lnterest 1,403 13.597
14,453
Balance due at the beginning of lll year
Journal entries in the books of vendor (for both methods): Less : IlIl Instalment
15,000
Particulars pebit Credit Less : Interest 547 14,453
At the beginning of the I year : Amount due
) Hire purchaser alc Dr XX
Journal entries in the books of Mr.P
To Sales alc XX Debit Credit
Particulars
(Being goods sold under Hire purchase) Rs. Rs.
2) Bank alc Dr XX
1.1.1992
To Hire purchaser alc XX
Cars alc Dr 56,000
(Being down payment received) To Hire vendor alc 56,000
At the end of Iand subsequent years : (Being 4 cars purchased)
1) Hire purchaser alc Dr XX
h.1.1992
To Interest alc XX
Hire vendor alc Dr 15,000
(Being interest receivable) To Bank alc 15,000
2) Bank alc Dr XX (Being advance amount paid)
To Hire purchaser alc XX
31.12.1992
(Being ...instalment amount received) Interest alc Dr 2,050
3) Interest alc Dr XX To Hire vendor alc 2,050
To Profit and loss alc XX (Being Iyear interest due)
(Being interest fransferred) 31.12.1992
Problem : 3 Hire vendor alc Dr 15,000
Mr.P purchased 4 cars for Rs.14,000 each on 1-1-92 under
ung the To Bank alc 15,000
hire purchase system. The hire purchase price for all the 4 cars was (Being IInstalment paid)
 1.16 Financial Accounting 147 Hire Purchase & Instaiment System
|31.12.1992 (Being depreciation provided)
Dr 5,600 31.12.1994
Depreciation alc 5,600 Dr 6,147
To Cars alc Profit and Loss alc 547
(Being depreciation provided) To Interest alc
5,600
31.12.1992 To, Depreci¡tion alc
Profit and Loss alc Dr 7,650 (Being amount transferred)
To Interest alc 2,050
Hire Vendor:
To Depreciation alc 5,600 Journal entries in the books of Debit Credit
(Being amount transferred) Particulars
Rs. Rs.
31.12.1993
Interest alc Dr 1,403 7.1.1992
To Hire vendor alc 1,403 P's alc
Dr 56,000
To Sales alc
56,000
(Being ll year interest due)
31.12.1993 (Being 4 cars sold on hire purchase syster)
Hire vendor alc Dr 15,000 1.1.1992
Dr 15,000
To Bank alc 15,000 Bank a/c
15,000
(Being I instalment paid) To P's alc
31.12.1993 (Being advance amount received)
Depreciation alc Dr 5,600 t 31.12.1992
To Cars alc 5,600 P's alc Dr 2,050
To Interest alc 2,050
(Being depreciation provided)
31.12.1993 (Being I year interest receivable)
Profit and Loss alc Dr 7,003 31.12.1992
To Interest alc Bank alc Dr 15,000
1,403
To P's alc 15,000
To Depreciation alc 5,600
(Being amount transferred) (Being | lnstalment received)
|31.12.1994 31.12.1992
Interest alc Dr 547 Interest alc Dr 2,050
To Hire vendor alc To Profit and Loss alc 2,050
547
(Being ll year interest due) (Being amount transferred)
31.12.1994 31.12.1993
Hire vendor alc P's alc Dr 1,403
Dr 15,000
To Bank alc To Interest alc 1,403
15,000
(Being ll Instalment paid) (Being Il year interest receivable)
31.12.1994 31.12.1993
Depreciation alc Bank alc Dr 15,000
Dr 5,600 15,000
To Cars alc To P's alc
5,600
 1.18 Financial Accounting 1.19 Hire Purchase & Instalment System
(Being Il Instalment received) Less : IV Instalment 20,000
31.12.1993
Interest a/c Dr 1,403 Interrest for 6 months (20,000 15/100 x 6/12) 1.500 20,000
Balance due
To Profit and Loss alc 1,403
(Being amount transferred)
Journal entries in the books of Hire vendor:
31.12.1994 Particulars Debit Credit
P's alc Dr 547 Rs. Rs.
To Interest alc 547
(Being ll year interest receivable)
At the beginning oflyear
31.12.1994 Hire purchaser alc Dr 1,00,000
Bank alc Dr 15,000 To Sales alc 1,00,000
To P's alc 15,000 (Being goods sold)
(Being ll Instalment received) i) Bank alc Dr 20,000
31.12.1994 To Hire purchaser alc 20,000
Interest alc Dr 547 (Being down payment received)
To Profit and Loss alc 547 At the end of I year (| six months)
(Being amount transferred) ) Hire purchaser alc Dr 6,000
Problem A:1)
machine was
To interest alc 6,000
bought for Rs.1,00,000 under hire purchase sys. (Being interest receivable)
tem down payment Rs. 20,000 and the balance is agreed to be paid in i) Bank alc Dr 26,000
fou
half yearly instalments with 15% interest p.a. 26,000
Depreciation provided a:
10% p.a. on the cost. Show the first year entries
is |ras lo Hire purchaser
in the b0oks of seller. (Being Iinstalment received)
Answer: Calculation of interest (M.S.University,
Rs.
April 2016 At the end of Iyear (ll six months)
Hire purchaser alc Dr 4,500
Rs.
Cash price of the machine To interest alc 4,500
Less : Down payment 1,00,000
20,000 (Being interest receivable)
Balance due at the beginning of Iyear )) Bank alc Dr 24,500
Less : I instalment 80,000
20,000 To Hire purchaser 24,500
Interest for 6 months (80,000 x 15/100 x 6/12) (Being l instalment received)
6,000 20,000
ii) Interest alc Dr 10,500
Less : l| Instalment 60,000
To Profit and Loss alc 10,500
Interest for 6 months (60,000 x 15/100 x 6/12) 20,000
4,500 20,000 (Being interest transferred)
|Atthe end of (lll six months)
Balance due at the beginnings of Ilyear 40,000
)Hire purchaser alc Dr 3,000
Less : Ill Instalment To interest alc 3,000
Interest for 6 months (40,000 20,000
x15/100 6/12) 3.000 20,000
x (Being interest receivable)
Dr 23,000
Bank alc
20,000 23,000
To Hire purchaser alc
 1.20 Financial Accounting 121Hire Purchase &instaiment System
Journal entries in the books of Ram Prasad
(Being 3rd instalment received) Particulars Debit Credit
Atthe end of second year (IV six months) Rs Rs
Dr 1,500
) Hire purchaser alc .1.2003
To interest alc 1,500
Machine alc Dr 37,250
(Being interest receivable) 37 250
Dr 21,500 To Hire vendor alc
i Bank alc
21,500 (Being machine purchased)
To Hire purchaser alc
1.1.2003
Being 4th instaBment received) Hire vendor alc Dr 10,000
interest alc Dr 4,500
4,500
ToBank alc 10,000
To Proft and Loss alc
(Being advance amount paid)
31.12.2003
Problem :(15 Interest alc Dr 1,363
Mr. Ramprasad purchased a machine under Hire purchase syste To Hire vendor alc 1,363
from Mumbai comparny on 1st January 2003, paying cash Rs. 10,000 ar: (Being I year interest due)
agreeing to pay three further instalments of Rs. 10,000 each on 31s 31.12.2003
December every year. The cash price of the machine is Rs. 37,250 ar Hire vendor alc Dr 10,000
kumbai company charges interest at 5% p.a. Ramprasad writes c To Bank alc 10.000
lepreciation at the rate of 10% p.a. on diminishing balance method. (Being IInstaiment paid)
Joumalise the above transactions and open ledger accounts in th 31.12.2003
books of Ramprasad. Depreciation alc Dr 3,725
(M.S.University April 2018 To Machine alc 3,725
Answer : Calculation of interest Rs. Rs.
Totai cash price (Being depreciation provided)
37,250 31.12. 2003
Less : Down payment 10,000 Profit and Loss alc Dr 5,088
Balance due at the beginning of I year 27.250 To Interest alc
Less : I nstalment 1,363
10,000 To Depreciation alc 3,725
Less: Interest 1,363 8,637
Balance due at the beginning of Il year (Being amount transferred)
18,613 31.12.2004
Less : Il Instaiment 10,000 Interest alc Dr 931
Less : Interest
931 9,069 To Hire vendor alc 931
Balance due at the beginning of ill year 9.544 (Being interest due for llyear)
Less : ll Instalment
Less: Interest
10,000 31.12.2004
456 9,544 Hire vendor alc Dr 10,000
Balance due To Bank alc 10,000
(Being instalment paid)
31.12.2004
 1.22 Financial Accountino
Dr 3,353 1.23 Hire Purchase & Instalment System
Depreciation alc 3,353 Hire Vendor alc
To Machine alc Particulars
Particulars Amount Amount
31.12.2004 Dr 4,284 h.1.03 To Bank 10,000 1.1/03 By Machine 37,250
Profit and Loss alc 931 B1.12.03 To Bank 10,000 31.12.03 By Interest 1,363
To Interest alc
3,353 To balance cd 18.613
ToDepreciation alc 38,613 38,613
(Being amount transferred) B1.12.04 To Bank 10,000 1.1.04 By balance bld 18,613
31.12.2005 Tobalance cld 9.544 By Interest 931
Interest alc Dr 456
456 19,544 19,544
To Hire vendor alc B1.12.05 To Bank 10,000 1.1.05 By balance bld 9,544
(Being Interest due) 31.12.05 By Interest 456
31.12.2005 10,000 10,000
Hire vendor alc Dr 10,000 Problem :6)
To Bank alc h0,000 On 1.1. 96 Baba &Co., purchased a machine on hire purchase
(Being third instalment paid) system, the total amount payable being Rs.42,700. Payment was to be
31.12.2005 made Rs.12,000 on that date and balance in three half yearly instalments
Depreciation alc Dr 3,017 of Rs.11,400, Rs.10,900 and Rs.8,400 commencing from 30.6.96. The
To Machine alc 3,017 vendor charged interest @ 10 p.a. calculated on half yearly interests.
(Being depreciation paid) Baba &Co.close their books annually on 30th June and provide
31.12.2005 depreciation @ 10% on reducing balance method.
Profit and Loss alc Dr 3,473 Determine the cash price of the machine and show the relevant
To Interest alc 456 accounts in the books of Baba &Co.
To Depreciation a/c 3,017 (M.S. University, April, 2019) (Madras University, April 2005)
(Being amount transferred) Answer: Calculation of cash price
Half year Instalment Interest Rs. Cash pric
3 8,400 8,400 x 5/105 = 400
Ledger accounts : Machine alc 8,000
Particulars |Amount Particulars Amou1 210,900 18,900 x 5/105 = 900 10,000
1.1.03 To Bank 1 n 11,400 29,400 x 5/105 =1,400 10,000
|37,25031.12/03 By Depreciation alc 3,72 1 |12,000 Down payment
By balance cdd 12,000
33,525 42,700 2,700 40,000
37.250 37.2
.1.04 To balance
b/d33,52531.12/04 By Depreciation 3,33 Ledger accounts in the books of Baba & Co.
By balance dd 30,172 Machine account
33,525 33.52: Particulars Rs. Particulars
h.1.05 To balance Rs.
b/d|30,17231.12/05 ByBy Depreciation
balance cld
3.01
27.5
1.1.96 To Hire vendor 40,000 30.06.96 By Depreciation alc 2,000
By balance cld 38,000
30,172
L1.06 To balance b/d27,155 30,172 40,000 t 40.000
 1.24 Financial Accounting
1.7.96To balance b/d 38,000 30.06.97 By Depreciation |9003,800
By balance cld
34,200
38,000 38,000
1.7.97 To balance b/d 34,200
Hire vendor account
1.1.96To bank |12,000 1.1.96 By Machine 40,000
B0.06.96To bank 11,400 30.06.96 By interest 1,400
B0.06.96To balance cld 18,000
|41,400 41,400
B1.12.96 To Bank 10,900 1.7.96 By balance b/d 18,000
BO.06.97 To Bank 8.400 31.12.96 By interest 900
30.6.97 By interest 400
19,300 19,30

Interest alc
B0.06.96 To Hire venddr 1,400 30.06:96 By P &L alc 1.40
1400 1,400
B0.06.97 To Hire venddr 1,300 30.06.97 By P& L alc 1,300
1,300 1,300
Depreciation alc
B0.06.96 To Assets 2,000 30.06.96 By P & L alc 2,000
2,000 2,00
B0.06.97 To Assets 3,800 30.06.97 By P &L alc 3,800
3,800 3,800
Problem: 17
A
company purchased on 1.1.1993 a machine on the hire purchas
system paying Rs. 4,000 down on the signing of the contract. It had to pa
three annual instalments of Rs. 4,000. The cash price of the machine
was Rs. 14,900. The rate of interest was 5%.
a) Prepare the Hire vendor's Account and show the interest conte
of each of the above instalments.
b) Show the interest calculation if the rate of interest is not give
the problem.
(M.S.University Nov. 2017,April2022)Rs.
a) Calculation of interest:
Cash price of the machine 14,900
 1.34
Ratio Interest
Financial Accounty
YearAmount due
4 8,000 x 4/10 = 1.35 Hire Purchasa & Instalment Systern
48,000
3 8,000 × 3/10 = PartlcularS Debit Credi
2 36,000 2 Hire vendor alc Dr
3 24,000 2 8,000 x 2/10 =
16 To Asset alc
12,000 8.000 x 1/10 =
(Being asset repossessed)
Total interest
10 &o i) Profit and Loss alc Dr
To Asset alc
Repossession (Being loss transferred)
If the hire purchaser fails to make payment of any instalmen!
called defaut. When the hire purchaser fails to pay instalment ah lournal entries in the books of hire vendor:
then the hire vendor has the right to repossess the asset. The procer. Dr
i) Repossessed stock alc
repossessing the asset or goods from the hire purchaser is knowMn To Hire purchaser alc
repossession. That is, the possession of the asset is re transferred to (Being goods repossessed)
Dr
i) Repossessed stock alc
XX
Hire Vendor. The repoSsession may be of TWO types.
To Cash alc
i) Complete Repossessionand (Being expenses paid)
i) Partial Repossession ii) Cash alc Dr XX
XX
To RepoSsessed stock alc
i) Complete Repossession: Dr
iv) Repossessed stock alc
XX
Al the g0ods, sold to the hire purchaser under hire purcha To Profit and Loss A/c XX
system, are repossessed by the hire vendor from the hire purchaser, whe
there is a default in payment of instalment. The process of repossessi (Being Profit and LOSs transferred)
ail the goods is known as complete repossession.
(e.g) A purchased 5 trucks on hire purchase system from Balu fails Problem Coon 1.1.2008
repay the first instalment. Balu repossessed all the 5 A purchased a motor carfor Rs. 80,000from Ram &
repossession.
Trucks. It is a complet payment to be made Rs. 20,000 down and Rs. 23,000 at the end of first
Rs. 21,000 at the end of
year, Rs. 22,000 at the end of second year and
depreciates the motor car at 10%
ii) Partial Repossession: third year. Interest was charged at 5%. A
method.
When there is a defauit in payment of per annum on written down value
any payment and first instalment at the end
vendor has the right to repossess apart of the goods instalment.
or assets soldtheto th: year having
hi of the firstA, after not down
could paid pay second instalment. The seller took
hire purchaser. The right to repossess the part of the asset is known a possession of the car, and after spending Rs. 4,000 on repairs of the
partial Repossession.
(e.g) Apurchased 5trucks on hire purchase asset, sold it away for Rs. 48,000.
Ledger accounts in the books of
repay the final instalment. Brepossessed 3
trusysem
cks from B. Afails to Give Journal entries and prepare
the hire purchaser. This is an example for partial and \eft 2 trucks wilh boththe parties. Rs. Rs.

Accounting Treatment for repossession of stock .

Journal entries in the books of hire purchaser Repos es ion. Answer : Calculation of Interest
Total cash price of the asset
Less: Down payment
Balance due at the beginning of lyear
80,000
20,000
60,000
 1.36 Financial Accountny
23,000
Less : Instalment 3,000
Rs. 60,000
Less : Interest on year
beginning of ll
20040n Ledger accounts in the books 1.37 Hire Purchase &Instalment System
of A (Hire purchaser)
Balance due at the 22,000 Motor car account
Less : II Instalment 2,000
40,000 Particulars Rs. Particulars Rs.
Less: Interest on Rs.
ll year
20,0 1.08 To Hire vendor 80,000 31.12,08 By Depreciation
Balance due at the beginning of Hire purchaser. 2lb00
8,000
of (be 200 By Balance cld 72,000
Journal entries in the books Debit
Particulars Credit 80,000 80,000
Rs. .1.09 To balance b/d 72,000 21.12.09 By Depreciation 7,200
Rs.
h.1.2008 By P & L alc 22,800
Motor car alc Dr |80,000 By Hire vendor 42,000
72,000 72,000
To Hire vendor (Ram &Co) alc 80,000
Hire vendor alc Dr 20,000 Hire vendor account
i1.12.08 To Bank 20,000 1.1.08 By Motor car 80,000
To Bank alc 20,000 To Bank 23,000 31.12.08 By Interest 3,000|
31.12.2008
Interest alc Dr 3,000 To balance cld 40,000
To Hire vendor 83,000 83,000
3,000 31.12.09To Motor car 42,000 1.1.09 By balance b/d 40,000
Hire vendor alc Dr |23,000
To Bank alc
31.12.09 By Interest 2,000
23,000 42,000 42,000
Deprecition alc Dr 8,000 Interest account
To Motor car
8,000 31.12.08 To Hire vendor 3,000 31.12.08 By P &L alc 3,000
Profit and Loss alc Dr 11,000/
To Interest alc 3,000
To Depreciation alc 3,000 3,000
8,000
31.12.2009 31.12.09 To Hire vendor 2,000 31.12.09 By P& L alc 2,000
Interest alc Dr 2,000
To Hire vendor 2,000
2,000 2.000
Depreciation alc Dr 7,200 Depreciation account
To Motor car alc
7,200 31.12.08 To Motor car 8.000 31.12.08 By P & L alc 8,000
Profit and Loss alc Dr 9,200 8,000
To Interest alc 8,000
To Depreciation 2,000 31.12.09 To Motor car 7.200 31.12.09 By P & L alc 7.200
Hire vendor alc 7,200
Dr |42,000 7.200 7200
To Motor car Note: i) The asset is completely taken back by the hire vendor.
(Being Motor car taken back by hire 42,000
Therefore, the vendor account is to be closed. Balancing figure of the
Profit and Loss account
Dr
vehdor) account is to be transferred to Asset account.
To Motor car |22,800 il) Any balance in the asset account is a loss or profit.Hence it is
(Being loss transferred) | 22,800 to be transferred to profit and loss account.
 1.38
Financial Accounting
ii) The hire purchaser did not pay the second instalment 1.39 Hire Purchase & Instalment System
end of the second year.But the asset is used by the Hire purchaser Hire purchaser account
second year also .Therefore, depreciation is provided for the second Particulars Rs. Particulars Rs.
Journal entries in the books of Hire vendor (Ram & co) 1.1.2008 1.1.2008
Particulars Debit Credit To Sales alc 80,000 By Bank 20,000
Rs. Rs. B1.12.2008 31.12.2008
To Interest alc 3,000 By Bank 23,000
H.1.2008
Hire purchaser alc Dr 80,000 By balance cld 40,000
To Sales alc 80,000 83.000 83,000
h.1.09 31.12.09
Bank alc Dr 20,000
To balance b/d 40,000 By Goods Repossed stock alc 42,000
To Hire purchaser alc 20,000
31.12.2008 B1.12.09 To interest 2.000 Balancing figure)
Hire purchasera l c D r 3,000 42,000 42,000
To Interest alc Goods Repossed stock account
3,000
B1.12.09 To Hire 31.12.09
io Bank alc Dr 23,000
To Hire purchaser alc purchase alc 42,000 By bank alc 48,000|
23,000 To Bank 4,000
Interest alc Dr 3,000 To Profit and Loss alc 2,000
To Profit and Loss alc 3,000
31.12.2008 (Balancing figures)48.000 48,000
tnterest account
Hire purchaser ac sDr 2,000 B1.12.08 To P & L alc 3,000 31.12.2008 By interest
To Interest alc 3,000
2,000
Interest alc Dr 3,000 3.000
2,000
To Profit and loss alc
2,000 B1.12.09 To P &Lalc 2,000 31.12.2009 By interest 2,000
Goods Repossessed stock alc Dr 42,000
To Hire purchaser alc 2.000 2.000
42,000 Problem: 23
(Being goods Repossessed) Mr. Mani purchased a machine from Balu Ltd. for
Goods Repossed stock alc Dr 4,000 payment to be made Rs.1,50,000 down and three instalments Rs.5,60,000,
To Bank alc of
4,000 Rs.1,50,000 each at the end of each year. He depreciates the asset at
(Being expenses paid) 10% per annum on written down value method.
Bank alc Dr 48,000 Because of financial difficulties, Mr. Mani after having paid down
To Goods Repossessed stock alc| 48,000 payment and first instalment at the end of first year, could
(Being repossessed stock sold) not pay
second instalment and the seller took
Goods repossessed stock alc Dr possession of the
ledger account in the books of both parties to record the asset. Open
2,000
To Profit and loss alc transactions.
2,000 (
(Being profit transferred) Answer: Calculation of interest: M.S.University, April 2020) Rs.
Total cash price of the Truck
Ledger accounts : 5,60,000
Less: Down payment
1.50,000
 1.40 Financial Accountiny Svstem
1.41 Hire Purchase & Instalment

Balance due at the

Less: I instalment
beginning of Iyear
1,50,000 4,10,00, purchaser alc
Repossessed stock alc
2,94,525
20,500 To Hire
Less: interest 4,10,000
x 5/100 1,29,5M Interest alc
By Hire purchaser alc 20,500|
Balance due at the beginning of
Less:Il instalment
Il year
1,50,000 2,8050 To P&L alc 20,500
14,025 By Hire purchaser alc 14,025|
5/100 14,025 L35.9, fTo P&L alc
Less: interest 2,80,500 x interest is Partial Reprossession:
installment amount is not paid,
Note : As the second
calculated for the second year. Problem: 24
DelhiMotors 3 trucks costing Rs.
Mani (Hire purchaser): X Transport Ltd. purchased from
Ledger accounts in the Books of system. Payment was to be made Rs.
Truck account 50.000 each on the hire purchase together with interest
Rs. | Particulars Rs 30.000 down and remainder on 3 equal instalments
Particulars
To Hire vendor alc 5,60,000 | By Depreciation alc 56.0 9%p.a. XTransport Ltd. writes off depreciation @ 20% on the diminishing
but could not
end of the first year
|By balance cld 5,04,0 balance. It paid the instalment due at the
leave one truck with the purchaser.
5,60,000| 5,60,00 pav the next. Delhi motorsS agreed to against the amount due. The
2 trucks
To balance b/d 5,04,000 | By Depreciation v0,40 adiusting the value of the othér annuallv. Precare the
| By P&L alc (b/f) 1,59,07: trucks were valued on the basis of 30% depreciation
years.
By Hire vendor a/c 2.94,52 neressany ledaer account in the books of X Transport Ltd. for 2
5,04,000 5,04,001 (M.K.University, November 1989 and M.S. University)
Hire vendor (Balu) alc Answer: Calculation of interest:
Rs.
To Bank alc 1,50,000 By Truck alc 5,60.001 1,50.000
To Bank alc 1,50,000 By Interest alc 20,50 Total cash price for 3 trucks (3 x 50,000)
30,000
To balance cld 2,80,500 Less: Down payment
1,20,000/3
5,80,500 5,80,500 Balance due at the beginning of first year
Less: First instalment 40,000
To Truck alc 2,94,525 By balance b/d 2,80,500
Interest (1,20,000 x 9/100) 10,800 40,000
(Balancing figure) By interest alc 14,025
Balance due at the beginning of ll year 80,000
2.94,525 2.94,525
Less: Il instalment 40,000 40,000
Interest (80,000 x 9/100) 7,200 40,000
Ledger account in the books of Hire vendor (Balu):
Hire purchaser (Mani) alc Note: i) Amount of instalment is to be calculated after deducting down
To Sales alc 5,60,000 By Bank 1,50,000 payment.
To Interest alc 20,500 By Bank alc 1,50,000 ii) Interest is to be paid together with interest. That is, Interest
is not included in instalment amount.
By balance cld 2,80,500 amount
i) Interest + instalment = Amount to be payable.
5,80,500 5,80,500 Calculation of the value of Truck left with Buyer (X Transport Ltd).:
To balance bld 2,80,500 By Repossessed stock 2,94,52:
No.of Truck left with buyer =1
To interest alc 14,025 = 50,000
Cost price of one Truck Rs.
Balancing figure)
2,94,525 2,94,525 Less: Depreciation for one year socooo =10,000
 1.42 Financial Accountnn
= 40,000 1.43 Hire Purchase & Instalment System
purchase agreement from Seenu the
Less: Depreciation for ll year =-8,00n costing Rs. 55,000. Under hire
follows:
Value of Truck left with buyer *J2,00n pavment was to be made as 25% of the cash price at the end of
10% of cash price down and
four subsequent half years.
Calculation of the value of Trucks taken back by vendor (Delhi Mo each of the
The payment due on 31st Decernber 2016 could not
be made and
No.of Trucks taken back =2 seenu, but after negotiation Bose was
Cost price of 2 Trucks (2 x 50,000) Rs. = 1,00 000 hence the machines were seized by value of the other two
that the
30 C0 allowed to keep 3 machines on the condition machines being
Less: Depreciation for I year machines would be adjusted against the amount due, the
70,000 Valued at cost less 25% depreciation - Bose's books are closed on 30th
Less: Depreciation for Il year To000'30 21,000 June each year and he charges 15% depreciation on original cost.
Value of Trucks taken back by the vendor 49,000 Seenu spent Rs. 6,000 on getting the machines thoroughly
overhauled and sold them for Rs. 95,000. Show the various accounts in the
Ledger accounts in the Books of X Transport Ltd:. books of Seenu.
Trucks alc
Answer:
Particulars Rs. Particulars R Calculation of interest:
ToHire vendor 1,50,000 By Depreciation alc 30,00 2,75,000
(Delhi motors) Cash price of 5 machines 55,000 x 5 = Rs.
By balance cld 120,00 Add: 10% of cash price Rs. 27,500
1,50,000 1,50,00 Total Hire purchase price Rs. 3,02,500
To balance b/d 1,20,000 By Depreciation alc 24,00 Interest for 4 instalments - Rs. 27,500
By P&L alc (Balancing Half year Amount due Ratio Interest(Rs.)
figure) 15,00 1 2,75,000 27,500x 4/10 = 11,000
By Hire vendor alc 49,0 27,500 x 3/10 = 8,250
2 2,06,250 3
By Balance c/d 32,000 2 27,500 x2/10 = 5,500
1,20,000 3 1,37,500
1,20,00 68,750 1 27,500 x 1/10= 2,750
Delhi Motors account
Particulars Rs. 27,500
To Bank alc Particulars
30,000 By Trucks alc 1,50,000 Calculation of value of Machines left with buyer:
To Bank (40,000 + 10,800) 50,800 Cost price of 3 machines = Rs. 1,65,000
To balance cld By Interest alc 10,300
80,000 Less: depreciation for one year = Rs. 24,750
Value of machines = Rs. 1,40.250
To Truck a/c 1,60,800 1,60,800
To balance cld 49,000 By balance b/d 80,000 Calculation of value of machines taken back by the vendor:
38,200 By Interest a/c Cost price of 2 machines (2 x 55,000) = Rs. 1,10,000
7,20) Less: Depreciation
87,200 = Rs. 27,500
87,200 Value of machines taken back by the vendor
By balance b/d = Rs. 82,500
38,200 OSs on asset = 2,75,000 - (82,500 + 41,250 + 1,40,250) = Rs. 11,000
Problem: 25
On 1st January 2015, Bose purchased Ledger accounts in the books of Seenu:
5 machines e
 1.44 Financial Accounting
Bose alc 145 Hire Purchase & Instalment System
Rs. Particulars (Being Iinstalment paid)
By Cash alc v) Depreciation alc
|Particulars
To Sales alc
2,75,000
By Cash alc
27 5 ToAsset alc
Dr

To Interest alc
11,000
8,250 By Goods repossessed 6875 (Being depreciation provided)
XX

To interest stock alc vi) P&L alc Dr

By balance cld 82,500 To Depreciation alc
XX

2,115,94,25500
XX
To Interest alc XX
2,94.250
1,15,500 (Being depreciation and Interest transferred)
To balance cld
Goods Repossessed stock
alc Journal entries in the Books of vendor:
Rs. Particulars beginning of I year:
Rs At the Particulars
Particulars By Cash Debit Credit
To Hire purchaser
|To Cash
82,500
6,000 95,00 i) Purchaser alc
To Sales alc
Dr XX
XX
6,500
To P&L alc(balancing fig.) To Interest suspense alc XX
95,000
Interest alc
95,000 (Being goods sold)
Particulars i) Cash alc Dr XX
Particulars Rs. Rs. To Purchaser alc XX
19,250 By Bose alc
To P&L alc
By Bose alc
11,000 (Being advance received)
19,250
8,250 At the end of l year and subsequent years
19,.250 ii) Interest suspense alc Dr XX
Instalment system: To interest alc XX
Journal entries in the Books of purchaser (Being interest receivable)
Particulars Debit Credit iv) Cash alc Dr XX
At the beginning of l year: To Purchaser alc XX
i) Asset alc Dr XX
(Being cash received)
Interest suspense alc Dr XX No Entry
v) For depreciation -
To Vendor alc XX vi) Interest alc Dr XX
(Being asset purchased) To P&L alc XX
i) Vendor alc Dr XX (Being interest transferred)
To Cash alc XX

(Being down payment made) Problem: 26

At the end of I year and subsequent years Balu purchased a motor Truck on 1st January 2015 from ABC
ii) Interest alc Dr XX Ltd., on Instalment system. He agreed to pay Rs. 6,900on taking delivery
To Interest suspense alc XX of the Truck and pay three annual instalments of Rs. 13,310 each. The
(Being interest due) cash price of the Truck was Rs. 40,000. ABC Ltd., charged interest at 10%
iv) Vendor alc Dr XX P.a. Balu wrote off depreciation at 20% p.a. on the straight line method.
To Cash alc XX Pass journal entries in the books of both parties.