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hirer determine
this agreement
and the hiring
hereby
constituted. On
such
termination,the
hirer shall
immediately
return the said
vehicle to the
owner at his
place of address
for the time
neglect, delay
or
indulgence on
the part of the
owner in
enforcing any
terms
or conditions of
this agreement
shall prejudice
the rights of the
owner
hereunder.8.The
agreement is
personal to the
hirer and the
rights of the
hirer shall not
be assignable
or chargeable by
him in favour of
third party.9.In
the event of
the hiring
being
determined by
the hirer or by
the owner
under clause
6hereof, the
hirer shall
forthwith return
the said vehicle
to the owner at
the hirer's
expense.The
determination of
the hiring as
aforesaid shall
not affect or
prejudice any
claim theowner
may have
against the hirer
for arrears of
hire payments or
for damages for
breachof this
agreement or his
right to
enforce such
claim by action
or
otherwise.10.Th
e owner
has permitted
the hirer to
have the said
vehicle
registered in his
own name
interms of the
provisions of
Motor Vehicles
Act, 1988 and
the rules framed
thereunder prov
ided that the
hirer shall
transfer such
registration in
favour of the
owner when
hereturns the
said vehicle to
the owner under
the terms of this
agreement.11.Th
e agreement
shall determine
if the hirer
commits any
act of
bankruptcy or
makes
anyarrangemen
t with his credit
ors or on prese
ntation of a pet
ition in the cou
rt for adjudicati
ng the hirer as an
insolvent or on
the appointment
of a receiver of
the propertiesof
the hirer or if an
application
is made by
any creditor
or other person
against
the hirer for the
attachment of
the said
vehicle.12.All
disputes,
differences
and/or claims,
arising out of
this agreement
shall be settled
byarbitration in
accordance with
the provisions
of Indian
Arbitration Act,
1940 or
anystatutory m
odification ther
eof and shall b
e referred to th
e sole arbitrati
on of Shri ........
............ or in
case of his
death, refusal,
neglect,
incapability to
act as
anarbitrator to
the sole
arbitration of
Shri....................
.. The award
given by the
arbitrator shall
be final and
binding on the
parties.13.The
parties hereby
admit that this
agreement has
been fully
explained to
them and
theyhave
understood the
meaning of all
the clauses of
this agreement
and they have
signedthis
agreement with
full
understanding of
the obligations
herein. IN
WITNESS
WHEREOF, the
parties have
hereunto set and
subscribed their
hands onthe date
and year above
mentioned.Signe
d and delivered
by the within
named
owner Signed
and delivered by
the within
named
hirer WITNESS
ES;
14
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1.2.
BIBLIOGRA
PHY
http://finance.ma
psofworld.com/c
orporatefinance/leasing/h
ire-purchase-
arrangement.htm
l
Rs.3200@5%
699Principal
6,801 Fifth instal
lment 7,500Less
Amount unpaid
7,178Interest
322Total:
(6,801)7,178(71
78)Nil6,8017,17
837,500699322
5,0007,5007,50
042,500
(b)
When interest
is not included
in installments:
Where the total
amount paid in
the form of
down payment
and all
installments is
exactlyequal to
the cash price,
it is regarded
that the interest
is not included
in installments.
Itmeans that
interest is
payable in
addition to the
agreed amount
of installment. It
isexplained in
the following
example.
Worked out
Example-2
(Calculation of
Interest):
On April 1,2005,
A Transport
Company
purchased a
Motor Lorry
from Motor
Supply Co. Ltd.
onhirepurchase basis,
the cash price
being Rs.
60,000. Rs.
15,000 on
signing of the
contract
andbalance in
three annual
installments of
Rs. 15,000 each
on 31st March
every year. In
addition toit,
interest at 5 per
cent per annum
was also
payable to
vendors on
outstanding
balances.
D e s c r i p
t i o n C a s
h priceinstallm
entsP r i n c i p
alinterest
total
Cash PriceLess
:down payment1
st
installment
15,000Int.@5%
on 45,000 2,250
Total:
17,250 2nd inst
allment 15,000I
nt.@5% on 30,0
00 1,500Total:
16,5003
rd
installment
15,000Int.@5%
on 15,000 750T
otal:
15,750Total:60,0
00(15,000)45,00
015,00030,0001
5,00015,00015,000Nil15,000
15,00015,00015
,00060,0002,2501,2507504
,50015,00017,2
5016,50015,750
64,500
Accounting in
the books of
Hire-vendor
Hire Vendor:
There is only
one method of
recording the
entries in the
books of hirevendor.Irrespec
tive of the fact
whether the
entries in the
books of hirepurchaser are
passed under
theAsset
Accrual Method
or under the
Total asset
value Method.
But the
accounting
entries in
thebooks of
hire-vendor are
always passed
under the total
Asset Method.
These entries
are asunder:(i)
On delivery
of goods
to the hirepurchaser
at the time
of
agreement:
H i r e
p
u r c h a s e r
A / c
D r . C
a s h
P r i c
e To Hire
Sales A/c.
(ii)
On receipt
of cash
at the time
of
agreement
(down
payment), if
any:
C a s h /
k
A / c
r . ( A m
o f
d o
B a n
.
D
t .
w n
p a y m e n t )
To HirePurchaser
(iii)
On interest
being due:
Hire Pu
rchaser A
/c Dr.Amt
. of Inte
r e s t To
Interest A/c.
(iv)
On receipt
of
installment:
C a s h
n k
A
( A m t
f
I n
/ b a
/ c .
.
o
s t a
l l m e n t )
To Hire
Purchaser
(v)
On Transfer
of Balance
of HireSales A/c.
to Trading
S a l e s
A
/ c
D r . C
a s h
P r i
c e To Trading
A/c.
(vi)
On Transfer
of amount
of interest
to P/L A/c:
Int
A/c
(Ba
of
A/c
A/c.
e
.
l
I
.
rest
Dr.
ance
ntt.
) To P/L
Note: In solving
a numerical pro
blem, before
recording
the entries,
the amount of i
nterestincluded
in various
instalments will
be separately
calculated as
already
explained.
Posting in
Ledger
Accounts:
After passing
entries in the
journal of hire
vendor the
following
accounts will be
opened
in theledger of
hire vendor
and the postings
will be made
accordingly.
(i) Hire
Purchaser A/c.
Hire Purchase
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