Exercise-1

Calculations of Interest Cash Price Less Down payment First Installment Less Interest on 220000@5% Second installment Less Interest on 151000@5% Third Installment Less interest 80,00 0 11000 80000 7550 82478 78,55 0

Cash Princip Intere Price al st 320000 10000 100000 0 220000 69,000 151,000 72450 78,550 69000 72450 11000 7550

Total 10000 0

80000 80000

3,928 78,550 32000 0

3,928 22478

82478 34247 8

Accounting in the Books of Hire vendor 1.On delivery of goods to the hire purchaser at the time agreement: Hire purchaser A/C To Hire-Sales A/C Cash/Bank A/C Dr [Amount of Payment] Dr [Amount of Interest] Dr [Amount of Installment] Dr [Cash Price]

2.On receipt of cash at the time of agreement(down payment),if any: To Hire-Purchaser Hire-Purchaser A/C To Interest A/C 4.On receipt of installment Cash/Bank A/C To Hire-Purchaser year only) Hire Sales A/C To Trading A/C Dr [Cash Price]

3.On interest being due

5.On Transfer of Balance of Hire sales A/C to trading A/C (at the end of first

6.On transfer of Amount of interest to P/L A/C:

Interest A/C To P/L A/C

Dr