You are on page 1of 3

Universiti Kuala Lumpur Faculty of Accountancy Second Semester 2013/2014 Financial Accounting and eporting 1 !

"#$%& 'U()$L(*$S Objectives of this project: • To apply what is learnt in Accounting for Hire-purchase • To give a hands on exposure to the Hire-purchase transactions • To familiarize students with certain sections in the Hire-purchase Act • To expose on how to apply and deal with financial reporting standards !"#$ Hire-purchase is regarded as common %method of ac&uisition' when an individual or company is ac&uiring of certain assets li(e motor car) good vehicle and others* !inancially) hire-purchase might also be (nown as a method of financing for the ac&uisition of such assets* +n ,alaysia) this type of financing is offered by wide range of companies from ban(ing and financial services sector* +n the legal perspective) Hire-purchase Act -./0 is considered as the main legislation to govern the hire-purchase transaction in ,alaysia* 1here the act provided a comprehensive coverage to bind a hire-purchase transaction) but as a reporting entity if both hirer2owner is a company$) the act didn't provide any clauses that ma(e the owner2hirer to disclose the information in their financial statement if they are a reporting entity* This shouldn't be the case where hire-purchase act was only to govern the transaction itself* +n fact this issue should become an interest of accounting profession* 3erhaps you might also consider this issue when completing this project paper* All you need to do are: 4et the flyers or advertisements produced by car dealers2salesmen2others or they might produce these together with the installment repayment schedule$* +f no repayment schedule was prepared) alternatively you may visit to any local ban(s or financial institutions' homepages to get such information* 4et the copy of Hire-purchase Act -./0 from any of internet sources* After you've got all the necessary documents) you are re&uired to perform and fulfill ALL these tas(s and &uestions: 5ased on the flyers2advertisements together with the repayment schedule:


• • •

6etermine the good cash price) cash deposit in ",$ 7 no* of installments in month-should be e&ual2more than /8 months$ you opt to choose) H3 price and monthly installment* Assuming that you would use the effective method to determine the interest income) calculate the rate to be used hint: you may use 39OA formula$ 3repare your own schedule which regard yourself as the owner seller$ of the goods from the first installment until the end of H3 term :se spreadsheet2,# ;xcel application$* As a guidance) you may refer to the following extracted repayment schedule or you can develop your own up to your creativity$< !eriod (nstallment +mont,3 4 12100 12100 (nterest +0./0-!rinciple 1alance 21.33 15.34 12034.2 3 12043.5 5 32253.2 / 22143.5 1

=To determine how much would go to principal and interest income
respectively, use th method stated in the HP Act 1967.

Assuming that default of installment occurs in the >? th period and repossession would ta(e place on the >@th period "epossession cost A ",>?8) !9 of the goods at repossession date A B?C of the good cash price$: o As a hirer) calculate t,e good6s repossession value2 total net paya7le and total amount claima7le to/+7y- o8ner * Then) perform the necessary journal entries to record the transaction by using gross method* o As an owner) calculate t,e good6s repossession value2 total payment received to date from t,e ,irer2 total net receiva7le and total claima7le to/+7y- t,e ,irer* Then) perform the necessary journal entries to record the transaction by using %based on collection' approach* Dow) refer to H3 Act -./0 and advertisement2offers made by the seller) did you ac(nowledge any non-compliance of the ActE +f yes) which section s$ were affectedE #tate the relevant section s$ and give your recommendation regarding the matters* Hint: Fou may focus on the sections of H3 Act -./0$ discuss in lectures* 6o you thin( H3 Act is enoug, as a statutory mechanism to bind the HirepurchaseE 6on't you thin( !inancial "eporting #tandard !"#$ should also draft one standard for hire-purchase< 4ive reason s$ to your answer whether yes or no$* 5eside that) which standard e*g* !"# -GG$ do you thin( provided by !"# which ma(e the reporting entity statutorily bound to report the Hire-purchase in


their financial statementE #tate which !"# and its' relevant paragraph* Then explain why you thin( so* "t,er re9uirements +tec,nical• • • • 3roject topic : Hire-purchase !orm a group comprising a ma:imum of four students* The group must not be wholly single sex2race* !inal report must be sent in this format: Iine spacing: -*?< !ont: Times Dew "oman< #ize font: -H* #ubmission date: before --*88am*