1

HIRE PURCHASE
Solution 1
Since the amount of principal included in each instalment is one & the same thus:
Let Principal = P and Interest = i
1st Instalment = P + 4i = 2,21,900
2nd Instalment = P + 3i = 2,06,050
3rd Instalment = P + 2i = 1,90,200 (1)
4th Instalment = P + 1i = 1,74,350 (2)

From (1) & (2)

i = 15,850 P = 1,58,500

Total Cash Price = [1,58,500 x 4] + 1,58,500 (DP)

= ₹ 7,92,500

Solution 2
Statement Showing the Computation of Cash Price and Periodic Interest
A B C D= B+ C E= F= D – E
Instalment Balance due at the Instalment Total Amount Due at Interest Balance
No. end after payment of Amount the end before the Dx10/110 Due at the
Instalment payment of instalment Beginning
3 - 55,000 55,000 5,000 50,000
2 50,000 49,000 99,000 9,000 90,000
1 90,000 53,000 1,43,000 13,000 1,30,000
Total cash price = ₹ 1,30,000+ 70,000 (down payment) =₹ 2,00,000.

Solution 3
Ratio of interest and amount due = Rate of interest/100 + Rate of interest = 12/112
No of Instalment Amount due at the Interest (₹) Principal due at
instalments amount (₹) time of instalment (₹) the beginning (₹)
(1) (2) (3) (4)
4th 55,000 55,000 5,893 49,107
3rd 87,000 1,36,107 14,583 1,21,524
2nd 98,000 2,19,524 23,520 1,96,004
1st 1,06,000 3,02,004 32,358 2,69,646
Total Cash Price = ₹ 1,40,000 + ₹ 2,69,646 = ₹ 4,09,646

Solution 4
Statement Showing the Computation of Cash Price and Periodic Interest
A B C D= B+ C E= F= D – E
Instalment Balance due at the Instalment Total Amount Due at Interest Balance
No. end after payment of Amount the end before the Dx10/110 Due at the
Instalment payment of instalment Beginning
3 - 1,10,000 1,10,000 10,000 1,00,000
2 1,00,000 1,20,000 2,20,000 20,000 2,00,000
1 2,00,000 1,63,000 3,63,000 33,000 3,30,000
- 3,30,000 - 3,30,000 30,000 3,00,000
Let Cash Price be X
X = ₹ 3,00,000 + 40% of X
0.6 X = ₹ 3,00,000
X = ₹ 3,00,000/0.6 = ₹ 5,00,000, cash price = ₹ 5,00,000
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing.
 2
Solution 5
Statement Showing the Computation of Cash Price and Periodic Interest
A B C D= B+ C E= F= D – E
Instalment Balance due at the Instalment Total Amount Due at Interest Balance
No. end after payment of Amount the end before the Dx10/110 Due at the
Instalment payment of instalment Beginning
3 - 1,10,000 1,10,000 10,000 1,00,000
2 1,00,000 1,42,000 2,42,000 22,000 2,20,000
- 2,20,000 - 2,20,000 20,000 2,00,000
1 2,00,000 1,30,000 3,30,000 30,000 3,00,000
Let Cash Price be X
X = ₹ 3,00,000 + 40% of X
0.6 X = ₹ 3,00,000
X = ₹ 3,00,000/0.6 = ₹ 5,00,000, cash price = ₹ 5,00,000

Solution 6
Statement Showing the Computation of Cash Price and Periodic Interest
A B C D= B+ C E= F= D – E
Instalment Balance due at the Instalment Total Amount Due at Interest Balance
No. end after payment of Amount the end before the Dx10/110 Due at the
Instalment payment of instalment Beginning
3 - 2,20,000 2,20,000 20,000 2,00,000
2 2,00,000 2,20,000 4,20,000 38,182 3,81,818
1 3,81,818 2,20,000 6,01,818 54,711 5,47,107
Total cash price = ₹ 5,47,107 + 2,40,000 (down payment) =₹ 7,87,107

Solution 7
Hire Purchase Price = Down Payment + Instalments
=₹ 3,00,000+(₹ 4,20,000 + ₹ 3,90,000 + ₹ 3,60,000 + ₹ 3,30,000) = 18,00,000
Total Interest = H.P. Price – Cash Price
= 18,00,000 – ₹ 15,00,000 = ₹ 3,00,000

Since Interest rate is not given it is to be calculated as follows:

Balance Cash Price after down payment = 15,00,000 – 3,00,000 = 12,00,000
Instalment PVF@10% Value
4,20,000 0.909 3,81,780
3,90,000 0.826 3,22,140
3,60,000 0.751 2,70,360
3,30,000 0.683 2,25,390
11,99,670
It is equivalent to 12,00,000 therefore interest rate considered is 10% p.a.

Calculation of interest included in each instalment

A B C=B*10% D E= D-C F= B – E
Instalment Balance due at Interest @ Instalment Amount Principal Balance Due at
No. the beginning 10% the End
1 12,00,000 1,20,000 4,20,000 3,00,000 9,00,000
2 9,00,000 90,000 3,90,000 3,00,000 6,00,000
3 6,00,000 60,000 3,60,000 3,00,000 3,00,000
4 3,00,000 30,000 3,30,000 3,00,000 Nil
3,00,000

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing.
 3
Solution 8
Hire Purchase Price = (23,100*5) + 32,433 = 1,47,933 Cash Price = 1,20,000
Total Interest = 1,47,933 – 1,20,000 = 27,933
Calculation of interest included in each instalment
A B C=B*10% D E= D-C F= B – E
Instalment Balance due at Interest @ Instalment Amount Principal Balance Due at
No. the beginning 10% the End
1 87,567 8,757 23,100 14,343 73,224
2 73,224 7,322 23,100 15,778 57,446
3 57,446 5,745 23,100 17,355 40,091
4 40,091 4,009 23,100 19,091 21,000
5 21,000 2,100 23,100 21,000 Nil
27,933

Books of Jai Ltd.

KM Ltd. A/c
Date Particulars Amount Date Particulars Amount
1/01/16 To Bank A/c 32,433 1/01/16 By Machinery A/c 1,20,000
31/12/16 To Bank A/c 23,100 31/12/16 By Interest A/c 8,757
31/12/16 To Balance c/d 73,224
1,28,757 1,28,757
31/12/17 To Bank A/c 23,100 1/01/17 By Balance b/d 73,224
31/12/17 To Balance c/d 57,446 31/12/17 By Interest A/c 7,322
80,546 80,546
31/12/18 To Bank A/c 23,100 1/01/18 By Balance b/d 57,446
31/12/18 To Balance c/d 40,091 31/12/18 By Interest A/c 5,745
63,191 63,191
31/12/19 To Bank A/c 23,100 1/01/19 By Balance b/d 40,091
31/12/19 To Balance c/d 21,000 31/12/19 By Interest A/c 4,009
44,100 44,100
31/12/20 To Bank A/c 23,100 1/01/20 By Balance b/d 21,000
31/12/20 By Interest A/c 2,100
23,100 23,100

Solution 9
In the Books of M/s Hello
Journal Entries
Date Particulars Dr. Cr.
2018 Machine A/c Dr. 2,00,000
Jan. 1 To M/s Pass A/c 2,00,000
(Being the purchase of a Machine on hire purchase
from M/s Pass)
“ M/s Pass A/c Dr. 80,000
To Bank A/c 80,000
(Being the amount paid on signing the H.P. contract)
Dec. 31 Interest A/c Dr. 7,200
To M/s Pass A/c 7,200
(Being the interest payable @ 6% on ₹ 1,20,000)
“ M/s Pass A/c (₹ 40,000+₹ 7,200) Dr. 47,200
To Bank A/c 47,200
(Being the payment of 1st instalment along with
interest)
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing.
 4
“ Depreciation A/c Dr. 20,000
To Machine A/c 20,000
(Being the depreciation charged @ 10% p.a. on ₹
2,00,000)
“ Profit & Loss A/c Dr. 27,200
To Depreciation A/c 20,000
To Interest A/c 7,200
(Being the depreciation and interest transferred to
Profit and Loss Account)
2019 Interest A/c Dr. 4,800
Dec. 31 To M/s Pass A/c 4,800
(Being the interest payable @ 6% on ₹ 80,000)
“ M/s Pass A/c (₹ 40,000 + ₹ 4,800) Dr. 44,800
To Bank A/c 44,800
(Being the payment of 2nd instalment along with
interest)
“ Depreciation A/c Dr. 18,000
To Machine A/c 18,000
(Being the depreciation charged @ 10% p.a.)
“ Profit & Loss A/c Dr. 22,800
To Depreciation A/c 18,000
To Interest A/c 4,800
(Being the depreciation and interest charged to Profit
and Loss Account)
2020 Interest A/c Dr. 2,400
Dec. 31 To M/s Pass A/c 2,400
(Being the interest payable @ 6% on ₹ 40,000)
“ M/s Pass A/c (₹ 40000 + ₹ 2,400) Dr. 42,400
To Bank A/c 42,400
(Being the payment of final instalment)
“ Depreciation A/c Dr. 16,200
To Machine A/c 16,200
(Being the depreciation charged @ 10% p.a.)
“ Profit & Loss A/c Dr. 18,600
To Depreciation A/c 16,200
To Interest A/c 2,400
(Being the interest and depreciation charged to Profit
and Loss Account)

Solution 10
Books of Mr. Nilesh
Tractor A/c
Date Particulars Amount Date Particulars Amount
1/4/17 To Raj Ltd. A/c 11,50,000 31/03/18 By Depreciation A/c 1,15,000
31/03/18 By Balance c/d 10,35,000
11,50,000 11,50,000
1/4/18 To Balance b/d 10,35,000 31/03/19 By Depreciation A/c 1,15,000
31/03/19 By Balance c/d 9,20,000
10,35,000 10,35,000
1/4/19 To Balance b/d 9,20,000 31/03/20 By Depreciation A/c 1,15,000
31/03/20 By Balance c/d 8,05,000
9,20,000 9,20,000
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing.
 5
Interest Suspense A/c
Date Particulars Amount Date Particulars Amount
1/4/17 To Raj Ltd. A/c 1,44,000 31/03/18 By Interest A/c 72,000
31/03/18 By Balance c/d 72,000
1,44,000 1,44,000
1/4/18 To Balance b/d 72,000 31/03/19 By Interest A/c 48,000
31/03/19 By Balance c/d 24,000
72,000 72,000
1/4/19 To Balance b/d 24,000 31/03/20 By Interest A/c 24,000
24,000 24,000

Raj Ltd. A/c

Date Particulars Amount Date Particulars Amount
1/04/17 To Bank A/c 2,50,000 1/04/17 By Tractor A/c 11,50,000
31/03/18 To Bank A/c 3,72,000 1/04/17 By Interest Suspense A/c 1,44,000
31/03/18 To Balance c/d 6,72,000
12,94,000 12,94,000
31/03/19 To Bank A/c 3,48,000 1/04/18 By Balance b/d 6,72,000
31/03/19 To Balance c/d 3,24,000
6,72,000 6,72,000
31/03/20 To Bank A/c 3,24,000 1/04/19 By Balance b/d 3,24,000
3,24,000 3,24,000

Interest for 3 years

Year 1= 9,00,000*8% = 72,000
Year 2= 6,00,000*8% = 48,000
Year 3= 3,00,000*8% = 24,000
Total 1,44,000

Solution 11
Calculation of Interest and Cash Price
Ratio of interest and amount due = 8 / (100 + rate of interest) i.e. 8/108
To ascertain cash price, interest will be calculated from last instalment to first instalment as follows
No. of Amount due at the time Instalment Total Interest Cumulative
instalments of instalment Cash price
3 rd
0 12,000 12,000 889 11,111
2nd 11,111 12,000 23,111 1,712 21,399
1 st
21,399 12,000 33,399 2,474 30,925
Total cash price = ₹ 30,925 + 12,000 (down payment) =₹ 42,925

Journal Entries in the books of M/s Kodam Enterprises

Date Particulars L.F. Dr. Amount Cr. Amount
1/4/20 Generator A/c Dr. 42,925
HP Interest Suspense A/c Dr. 5,075
To Sanctum Ltd. A/c 48,000
(Asset acquired on hire purchase)
1/4/20 Sanctum Ltd. A/c Dr. 12,000
To Bank A/c 12,000
(When down payment is made)
31/3/21 Interest A/c Dr. 2,474
To HP Interest Suspense A/c 2,474
(For Interest of the year)
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing.
 6
31/3/21 Sanctum Ltd. A/c Dr. 12,000
To Bank A/c 12,000
(Being instalment paid)
31/3/21 Depreciation A/c Dr. 4,292.50
To Generator A/c 4,292.50
(Being depreciation charged @10%)
31/3/21 Profit & Loss A/c Dr. 6,766.50
To Depreciation A/c 4,292.50
To Interest A/c 2,474
(For closing interest and depreciation account)

Solution 12
Machinery A/c
Particulars Amount Particulars Amount
To Hire Vendor A/c 15,532 By Depreciation A/c 1,553
By Balance c/d 13,979
15,532 15,532
To Balance b/d 13,979 By Depreciation A/c 1,398
By Balance c/d 12,581
13,979 13,979
To Balance b/d 12,581 By Vendor A/c 11,000
By Depreciation A/c 1,258
By P& L A/c 323
(Loss on Surrender)
12,581 12,581

Hire Vendor A/c

Particulars Amount Particulars Amount
To Bank A/c 6,000 By Machinery A/c 15,532
To Balance c/d 12,639 By Interest A/c 3,107
18,639 18,639
To Bank A/c 6,000 By Balance b/d 12,639
To Balance c/d 9,167 By Interest A/c 2,528
15,167 15,167
To Machinery A/c 11,000 By Balance b/d 9,167
By Interest A/c 1,833
11,000 11,000

Working Note:-
Statement Showing the Computation of Cash Price
A B C D= B+ C E= F= D – E
Instalment Balance due at the Instalment Total Amount Due at Interest Balance
No. end after payment of Amount the end before the Dx20/120 Due at the
instalment payment of instalment Beginning
4 - 6,000 6,000 1,000 5,000
3 5,000 6,000 11,000 1,833 9,167
2 9,167 6,000 15,167 2,528 12,639
1 12,639 6,000 18,639 3,107 15,532
Total Cash Price = ₹ 15,532

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing.
 7
Solution 13
Books of Shimla Transport Company
Shimla Motor Company A/c
Date Particulars Amount Date Particulars Amount
1/1/20 To Bank A/c 25,000 1/1/20 By Truck A/c 1,00,000
31/12/20 To Bank A/c 30,000 31/12/20 By Interest A/c 7,500
31/12/20 To Balance c/d 52,500
1,07,500 1,07,500
31/12/21 To Truck A/c 57,750 1/1/21 By Balance b/d 52,500
31/12/21 By Interest A/c 5,250
57,750 57,750

Truck A/c
Date Particulars Amount Date Particulars Amount
1/1/20 To Shimla Motor Co. 1,00,000 31/12/20 By Depreciation A/c 20,000
A/c
31/12/20 By Balance c/d 80,000
1,00,000 1,00,000
1/1/21 To Balance b/d 80,000 31/12/21 By Depreciation A/c 16,000
31/12/21 By Shimla Motor Co. A/c 57,750
31/12/21 By P & L A/c 6,250
(Loss on surrender)
80,000 80,000

Books of Shimla Motor Company

Shimla Transport Company A/c
Date Particulars Amount Date Particulars Amount
1/1/20 To H P Sales A/c 1,00,000 1/1/20 By Bank A/c 25,000
31/12/20 To Interest A/c 7,500 31/12/20 By Bank A/c 30,000
31/12/20 By Balance c/d 52,500
1,07,500 1,07,500
1/1/21 To Balance b/d 52,500 31/12/21 By Goods Repossessed 57,750
A/c
31/12/21 To Interest A/c 5,250
57,750 57,750

Goods Repossessed A/c

Date Particulars Amount Date Particulars Amount
31/12/21 To Shimla Transport Co. 57,750 - By Bank A/c 69,000
- To Cash A/c 4,000
- To Profit & Loss A/c 7,250
(Profit on sale)
69,000 69,000

Solution 14
Books of X
Machinery A/c
Date Particulars Amount Date Particulars Amount
1/01/21 To Hire Vendor A/c 14,900 30/06/21 By Depreciation A/c (6M) 745
30/06/21 By Balance c/d 14,155
14,900 14,900
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 8
1/07/21 To Balance b/d 14,155 30/06/22 By Depreciation A/c 1,416
30/06/22 By Hire Vendor A/c 7,918
30/06/22 By P&L A/c (Loss) 4,821
14,155 14,155

Hire Vendor A/c

Date Particulars Amount Date Particulars Amount
30/06/21 To Bank A/c 4,000 1/01/21 By Machinery A/c 14,900
30/06/21 To Balance c/d 11,347 30/06/21 By Interest A/c 447
15,347 15,347
31/12/21 To Bank A/c 4,000 1/07/21 By Balance b/d 11,347
30/06/22 To Machinery A/c 7,918 31/12/21 By Interest A/c 340
30/06/22 By Interest A/c 231
11,918 11,918

Solution 15
In the Books of ABC Ltd
Machinery Account
Date Particulars ₹ Date Particulars ₹
1st Year To P Ltd’s A/c 59,040 1st Year By Depreciation @20% 11,808
By Balance c/d 47,232
59,040 59,040
2nd Year To Balance b/d 47,232 2nd Year By Depreciation @20% 9,446
By Balance c/d 37,786
47,232 47,232
3rd Year To Balance b/d 37,786 3rd Year By Depreciation @20% 7,557
To P & L a/c (b/f) 14,771 By P Ltd a/c 45,000

52,557 52,557

P Ltd’s Account
Date Particulars ₹ Date Particulars ₹
1st Year To Cash a/c 25,000 1st Year By Machinery a/c 59,040
To Balance c/d 48,800 By Interest a/c 14,760
73,800 73,800
2nd Year To Cash a/c 25,000 2nd Year By Balance b/d 48,800
To Balance c/d 36,000 By Interest a/c 12,200
61,000 61,000
3rd Year To Machinery a/c 45,000 3rd Year By Balance b/d 36,000
By Interest a/c 9,000
45,000 45,000
Working Note: 1
Statement Showing the Computation of Cash Price and Periodic Interest
A B C D= B+ C E= F= D – E
Instalment Balance due at the Instalment Total Amount Due at Interest Balance
No. end after payment of Amount the end before the Dx25/125 Due at the
Instalment payment of instalment Beginning
4 - 25,000 25,000 5,000 20,000
3 20,000 25,000 45,000 9,000 36,000
2 36,000 25,000 61,000 12,200 48,800
1 48,800 25,000 73,800 14,760 59,040
The copyright of these notes is with C.A. Nitin Goel
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 9
Solution 16
Books of X Ltd.
Milk Van A/c
Date Particulars Amount Date Particulars Amount
1 1
Start To Super Motors A/c 2,25,000 End By Depreciation A/c 45,000
End By Balance c/d 1,80,000
2,25,000 2,25,000
2 2
Start To Balance b/d 1,80,000 End By Depreciation A/c 36,000
End By Super Motors A/c 73,500
End By Profit & Loss A/c 22,500
End By Balance c/d 48,000
1,80,000 1,80,000

Super Motors A/c

Date Particulars Amount Date Particulars Amount
1 1
Start To Bank A/c 45,000 Start By Milk Van A/c 2,25,000
End To Bank A/c 76,200 End By Interest A/c 16,200
End To Balance c/d 1,20,000
2,41,200 2,41,200
2 2
End To Milk Van A/c 73,500 Start By Balance b/d 1,20,000
End To Balance c/d 57,300 End By Interest A/c 10,800
1,30,800 1,30,800
3 3
End To Bank A/c 58,589 Start By Balance b/d 57,300
End By Interest A/c ( 3 months) 1,289
58,589 58,589
Working Notes:
Computation of the value of repossessed asset:
Particulars Depreciation Depreciation
charged @ 20% charged @ 30%
Cost price 1,50,000 1,50,000
(-) Depreciation (1st year) (30,000) (45,000)
1,20,000 1,05,000
(-) Depreciation (2nd year) (24,000) (31,500)
96,000 73,500
Difference in values = ₹ 96,000 − ₹ 73,500 = ₹ 22,500

Solution 17
Statement Showing the Computation of Cash Price and Interest
A B C D= B+ C E= F= D – E
Instalment Balance due at the Instalment Total Amount Due at Interest Balance
No. end after payment of Amount the end before the Dx10/110 Due at the
instalment payment of instalment Beginning
3 - 5,50,000 5,50,000 50,000 5,00,000
2 5,00,000 4,90,000 9,90,000 90,000 9,00,000
1 9,00,000 4,20,000 13,20,000 1,20,000 12,00,000
Total cash price = ₹ 12,00,000 + 6,00,000 (down payment) =₹ 18,00,000

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing.
 10
Cars A/c
Date Particulars Amount Date Particulars Amount
1/04/19 To Fair Value Motors A/c 18,00,000 31/03/20 By Depreciation A/c 4,50,000
31/03/20 By Balance c/d 13,50,000
18,00,000 18,00,000
1/04/20 To Balance b/d 13,50,000 31/03/21 By Depreciation A/c 3,37,500
31/03/21 By Balance c/d 10,12,500
13,50,000 13,50,000
1/04/21 To Balance b/d 10,12,500 31/03/22 By Depreciation A/c 2,53,125
31/03/22 By Fair Value Motors A/c 1,94,400
31/03/22 By P&L A/c (Loss) 1,85,288
31/03/22 By Balance c/d 3,79,687
½(10,12,500-2,53,125)
10,12,500 10,12,500

Fair Value Motors Pvt. Ltd. A/c

Date Particulars Amount Date Particulars Amount
1/04/19 To Bank A/c 6,00,000 1/04/19 By Cars A/c 18,00,000
31/03/20 To Bank A/c 4,20,000 31/03/20 By Interest A/c 1,20,000
31/03/20 To Balance c/d 9,00,000
19,20,000 19,20,000
31/03/21 To Bank A/c 4,90,000 1/04/20 By Balance b/d 9,00,000
31/03/21 To Balance c/d 5,00,000 31/03/21 By Interest A/c 90,000
9,90,000 9,90,000
31/03/22 To Cars A/c 1,94,400 1/04/21 By Balance b/d 5,00,000
31/03/22 To Balance c/d 3,55,600 31/03/22 By Interest A/c 50,000
5,50,000 5,50,000
30/06/22 To Bank A/c 3,73,380 1/04/22 By Balance b/d 3,55,600
(Amount settled after 3 30/06/22 By Interest A/c 17,780
months) (3,55,600*20%*3/12)
3,73,380 3,73,380
Working Notes:
Computation of the value of repossessed asset:
Particulars Depreciation charged @ 40%
Cost price 9,00,000
(-) Depreciation (1st year) (3,60,000)
5,40,000
(-) Depreciation (2 year)
nd
(2,16,000)
3,24,000
(-) Depreciation (3 year)
rd
(1,29,600)
1,94,400

Solution 18
Statement Showing the Computation of Cash Price and Interest
A B C D= B+ C E= F= D – E
Instalment Balance due at the Instalment Total Amount Due at Interest Balance
No. end after payment of Amount the end before the Dx10/110 Due at the
instalment payment of instalment Beginning
3 - 1,65,000 1,65,000 15,000 1,50,000
2 1,50,000 1,47,000 2,97,000 27,000 2,70,000
1 2,70,000 1,59,000 4,29,000 39,000 3,90,000
Total cash price = ₹ 3,90,000 + 3,00,000 (down payment) =₹ 6,90,000
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing.
 11
Books of Amar
Scooter A/c
Date Particulars Amount Date Particulars Amount
1/04/19 To M/s Bhanu A/c 6,90,000 31/03/20 By Depreciation A/c 1,38,000
31/03/20 By Balance c/d 5,52,000
6,90,000 6,90,000
1/04/20 To Balance b/d 5,52,000 31/03/21 By Depreciation A/c 1,10,400
31/03/21 By Balance c/d 4,41,600
5,52,000 5,52,000
1/04/21 To Balance b/d 4,41,600 31/03/22 By Depreciation A/c 88,320
31/03/22 By M/s Bhanu A/c 78,890
31/03/22 By P&L A/c (Loss) 38,870
31/03/22 By Balance c/d 2,35,520
(4,41,600-88,320)*4/6
4,41,600 4,41,600

M/s Bhanu A/c

Date Particulars Amount Date Particulars Amount
1/04/19 To Bank A/c 3,00,000 1/04/19 By Scooter A/c 6,90,000
31/03/20 To Bank A/c 1,59,000 31/03/20 By Interest A/c 39,000
31/03/20 To Balance c/d 2,70,000
7,29,000 7,29,000
31/03/21 To Bank A/c 1,47,000 1/04/20 By Balance b/d 2,70,000
31/03/21 To Balance c/d 1,50,000 31/03/21 By Interest A/c 27,000
2,97,000 2,97,000
31/03/22 To Scooter A/c 78,890 1/04/21 By Balance b/d 1,50,000
31/03/22 To Balance c/d 86,110 31/03/22 By Interest A/c 15,000
5,50,000 1,65,000
31/08/22 To Bank A/c (Amount 91,492 1/04/22 By Balance b/d 86,110
settled after 5 months)
31/08/22 By Interest A/c 5,382
(86,110*15%*5/12)
91,492 91,492

Books of Bhanu
Goods Repossessed A/c
Date Particulars Amount Date Particulars Amount
31/03 To Amar A/c 78,890 25/04 By Bank A/c 1,05,000
25/04 To Bank A/c 15,000
25/04 To Profit & Loss A/c 11,110
(Profit on sale)
1,05,000 1,05,000

Working Notes: Computation of the value of repossessed asset:

Particulars Depreciation charged @ 30%
Cash price (6,90,000*2/6) 2,30,000
(-) Depreciation (1 year)
st
(69,000)
1,61,000
(-) Depreciation (2nd year) (48,300)
1,12,700
(-) Depreciation (3rd year) (33,810)
78,890
The copyright of these notes is with C.A. Nitin Goel
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 12
Solution 19
Books of X
Y Ltd. A/c
Date Particulars Amount Date Particulars Amount
2019 2019
1/1 To Bank A/c 1,80,000 1/1 By Machinery A/c 6,00,000
31/12 To Balance c/d 4,62,000 31/12 By Interest A/c 42,000
6,42,000 6,42,000
2020 2020
31/12 To Bank A/c 2,28,200 1/1 By Balance b/d 4,62,000
(1,40,000+ 46,200+42,000)
31/12 To Balance c/d 2,80,000 31/12 By Interest A/c 46,200
5,08,200 5,08,200
2021 2021
31/12 To Machinery A/c 2,00,000 1/1 By Balance b/d 2,80,000
31/12 To Balance c/d 1,08,000 31/12 By Interest A/c 28,000
3,08,000 3,08,000

Machinery A/c
Date Particulars Amount Date Particulars Amount
2019 2019
1/1 To Y Ltd. A/c 6,00,000 31/12 By Depreciation A/c 60,000
31/12 By Balance c/d 5,40,000
6,00,000 6,00,000
2020 2020
1/1 To Balance b/d 5,40,000 31/12 By Depreciation A/c 60,000
31/12 By Balance c/d 4,80,000
5,40,000 5,40,000
2021 2021
1/1 To Balance b/d 4,80,000 31/12 By Depreciation A/c 60,000
31/12 By Y Ltd. A/c 2,00,000
31/12 By P & L A/c (Loss) 80,000
31/12 By Balance c/d 1,40,000
4,80,000 4,80,000

Working Notes:
(1) Computation of the value of repossessed machines
Assuming that each machine costs the same i.e. ₹ 2,00,000
= (₹ 2,00,000 + ₹ 2,00,000 ) – 50%
= ₹ 4,00,000 – ₹ 2,00,000 = ₹ 2,00,000

(2) Value of the balance machine left with X Ltd.

Particulars ₹
Cash Cost as on 1/1/2019 2,00,000
(-) Depreciation @ 10% p.a.
2019 20,000
2020 20,000
2021 20,000 (60,000)
1,40,000

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing.
 13
Solution 20
Books of Girish Transport Ltd.
NCR Motors A/c
Date Particulars Amount Date Particulars Amount
2019 2019
1/1 To Bank A/c 30,000 1/1 By E-Rickshaw A/c 1,80,000
31/12 To Bank A/c 65,000 31/12 By Interest A/c 15,000
31/12 To Balance c/d 1,00,000
1,95,000 1,95,000
2020 2020
31/12 To E-Rickshaw A/c 58,800 1/1 By Balance b/d 1,00,000
31/12 To Balance c/d 51,200 31/12 By Interest A/c 10,000
1,10,000 1,10,000
2021 2021
31/12 To Balance c/d 56,320 1/1 By Balance b/d 51,200
31/12 By Interest 5,120
56,320 56,320

E-Rickshaw A/c
Date Particulars Amount Date Particulars Amount
2019 2019
1/1 To NCR Motors A/c 1,80,000 31/12 By Depreciation A/c 36,000
31/12 By Balance c/d 1,44,000
1,80,000 1,80,000
2020 2020
1/1 To Balance b/d 1,44,000 31/12 By Depreciation A/c 28,800
31/12 By NCR Motors A/c 58,800
31/12 By Profit & Loss A/c 18,000
31/12 By Balance c/d 38,400
1,44,000 1,44,000
2021 2021
1/1 To Balance b/d 38,400 31/12 By Depreciation A/c 7,680
31/12 By Balance c/d 30,720
38,400 38,400

Working Notes:
Computation of the value of repossessed asset:
Particulars Depreciation Depreciation
charged @ 20% charged @ 30%
Cost price 1,20,000 1,20,000
(-) Depreciation (1st year) (24,000) (36,000)
96,000 84,000
(-) Depreciation (2nd year) (19,200) (25,200)
76,800 58,800
Difference in values = ₹ 76,800 − ₹ 58,800 = ₹ 18,000

Note: In the absence of any information regarding payment of the balance amount of ₹ 56,320 by Girish
Transport Ltd. to NCR Motors Ltd., it has been assumed in the above solution that the balance payment
amounting ₹ 56,320 had not been made till 31st Dec. 2021. Alternatively we can assume that the same is
paid & in that case we would have written ‘To Bank A/c’

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing.
 14
Solution 21
(i)
Price of 2 cars = 2,00,000*2 4,00,000
Less: Depreciation for the 1st year @ 30% (1,20,000)
2,80,000
Less: Depreciation for the 2nd year @ 30% (84,000)
Agreed value of 2 cars taken back by the hire vendor 1,96,000
(ii)
Cash Price of one car 2,00,000
Less: Depreciation for the 1st year @ 20% (40,000)
1,60,000
Less: Depreciation for the 2nd year @ 20% (32,000)
Book Value of car left with hire purchaser 1,28,000

(iii)
Book Value of one car as calculated in above note 1,28,000
Book value of 2 cars (1,28,000*2) 2,56,000
Agreed value of 2 cars taken back by the hire vendor 1,96,000
Hence, loss on cars taken back (2,56,000-1,96,000) 60,000

(iv)
Sale proceeds of cars repossessed 1,70,000
Less: Value at which car taken back 1,96,000
Repair 10,000 2,06,000
Loss on resale 36,000

Solution 22
Repossession is the Right of the Seller to take back the goods sold from the Hire purchaser in case of any
default by the Hire purchaser and can sell the goods after reconditioning to any other person. The hire
purchaser closes the Hire Vendor’s Account by transferring the balance of Hire Vendor Account to Hire
Purchase Asset and then finding the profit and loss on repossession in Asset Account.

Solution 23
Hire Purchase accounts in the buyer’s books

Tractors on Hire Purchase Account

Date Particulars Amount Date Particulars Amount
2020 2020
01/04 To HP Co. - Cash price 14,000 31/12 By Balance c/d
Tractor A Tractor A 14,000
Tractor B 19,000
01/10 To HP Co. - Cash price 19,000
Tractor B
33,000 33,000
2021 2021
01/01 To Balance b/d 30/06 By Disposal of Tractor A/c 19,000
Tractor A 14,000 - Transfer
Tractor B 19,000
31/12 By Balance c/d 14,000
Tractor B
33,000 33,000

The copyright of these notes is with C.A. Nitin Goel

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 15
Provision for Depreciation of Tractors Account
Date Particulars Amount Date Particulars Amount
2020 2020
31/12 To Balance c/d 3,050 31/12 By P&L A/c (Dep.)
Tractor A 2,100
Tractor B 950
3,050 3,050
2021 2021
30/06 To Disposal of Tractor 2,850 01/01 By Balance b/d 3,050
A/c – Transfer
31/12 To Balance c/d 4,900 30/06 By P&L A/c (Dep.) 1,900
Tractor B
31/12 By P&L A/c (Dep.) 2,800
Tractor A
7,750 7,750

Disposal of Tractors Account

Date Particulars Amount Date Particulars Amount
2021 2021
30/06 To Tractors on hire 19,000 30/06 By Provision for Dep. of 2,850
purchase—Tractor B Tractors A/c
10/07 By Cash : Insurance 15,000
31/12 By P & L A/c : Loss 1,150
19,000 19,000

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing.