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DATE: 24-MARCH-2015
JINNAH DEGREE COLLEGE OF
COMMERCE&MANAGEMENT SCIENCES
CHAPTER#4
HIRE PURCHASE ACCOUNTS
SECTION A: CASH PRICE IS GIVEN
WORKING:
CALCULATION OF INTEREST
CASH PRICE=10000
(-)DOWN PAYMENT= (4000)
BALANCE = 6000
INTEREST IN 1999=6000*5%=300
INTEREST IN 2000
BALANCE-1ST INSTALLMENT=6000-2000=4000*5%=200
INTEREST=200
INTEREST IN 2001
BALANCE-2ND INSTALLMENT=4000-2000=2000*5%=100
INTEREST=100
CALCILATION OF DEPRECIATION
STRAIGHT LINE METHOD
10000*5%=500
31-DEC-
BY BALANCE 9000
2000
31-DEC-
2001 BY BALANCE 8500
KUSUM
ACCOUNT
DR
CR
DATE PARTICULARS AMOUN DATE PARTICULAR AMOUN
T S T
1-JAN-1999 TO BANK 4000 1-JAN- BY MACHINE 10000
1999
31-DEC-1999
DR DEPRECIATION ACCOUNT CR
INTEREST A/C
31-JAN-2001 TO PROFIT AND LOSS A/C 200
(BEING INTEREST CHARGED TO P&L) 200
BANK A/C
TO SHARDA A/C 2100
(BEING 3RD INSTALLMENT RECEIVED) 2100
INTEREST A/C
TO PROFIT AND LOSS A/C 100
(BEING INTEREST CHARGED TO P&L) 100
TO INTEREST 100
DR INTEREST ACCOUNT CR
2.
WORKING:
CALCULATION OF INTEREST
RATE OF INTEREST=5%
BALANCE =15000
INTEREST IN 1998=15000*5%=750
INTEREST IN 1999
INTEREST=500
INTEREST IN 2000
BALANCE-2ND INSTALLMENT=10000-5000=5000*5%=250
INTEREST=250
DR MACHINE ACCOUNT CR
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
1-APRIL- TO B ACCOUNT 20000 31-DEC- BY DEPRECIATION 2000
1998 1998
31-DEC-
1998 BY BALANCE 18000
TOTAL 20000 TOTAL 20000
1-JAN-1999 TO BALANCE 18000 31-DEC- BY DEPRECIATION 2000
1999
31-DEC-
1999 BY BALANCE 16000
TOTAL 18000 TOTAL 18000
1-JAN- TO BALANCE 16000 31-DEC- BY DEPRECIATION 2000
2000
2000 31-DEC-
2000 BY BALANCE 14000
TOTAL 16000 TOTAL 16000
IN THE BOOKS OF A LTD
DR B ACCOUNT CR
DR INTEREST ACCOUNT CR
DR DEPRECIATION ACCOUNT CR
3.
BALANCE=7500-1000=6500
1500*5=7500
DR MACHINES ACCOUNT CR
31-DEC- 31-DEC-
1999 TO BALANCE 3500 1999 BY INTEREST 250
TOTAL 5250 TOTAL 5250
31-DEC- TO BANK 1675 1-JAN- BY BALANCE 3500
2000 2000
31-DEC- 31-DEC-
2000 TO BALANCE 2000 2000 BY INTEREST 175
TOTAL 3675 TOTAL 3675
31-DEC- BY INTEREST 25
2002
TOTAL 525 TOTAL 525
4.
INSTALLMENTS=12500*4=50000
TOTAL 55000
FOR 1997=5000*4/10=2000
FOR 1998=5000*3/10=1500
FOR 1999=5000*2/10=1000
FOR 2000=5000*1/10=500
BY BALANCE 37500
TOTAL 55000 TOTAL 55000
1-JAN- TO BALANCE 37500 31-DEC-1998 BY CASH 12500
1998 31-DEC-1998
BY BALANCE 25000
TOTAL 37500 TOTAL 37500
1-JAN- TO BALANCE 25000 31-DEC-1999 BY CASH 12500
1999 31-DEC-1999
BY BALANCE 12500
TOTAL 25000 TOTAL 25000
1-JAN- TO BALANCE 12500 31-DEC-2000 BY CASH 12500
2000
TOTAL 12500 TOTAL 12500
DR INTEREST ACCOUNT CR
5.
WORKING:
CASH PRICE OF MOTOR CAR=37250
BALANCE = 27250
INTEREST = 2750
CALCULATION OF INTEREST
YEAR BALANCE RATE OF AMOUNT OF INSTALLMENTS TOTAL
INTEREST INTEREST PAYMENT
31- 27250 5% 1363 8637 10000
DEC-
1998
31- 18613 5% 931 9069 10000
DEC-
1999
31- 9543 5% 477 9543 10021
DEC-
2000
TOTAL 2771 27249 30021
RS.22 ADJUSTED IN LAST YEAR
BY BALANCE 20000
TOTAL 40000 T0TAL 40000
1-JAN- TO BALANCE 20000 31-DEC- BY CASH 10000
1999 1999
31-DEC-
1999
BY BALANCE 10000
TOTAL 20000 TOTAL 20000
1-JAN- TO BALANCE 10000 31-DEC- BY CASH 10022
2000 2000
31-DEC-
2000 TO INTEREST 22
TOTAL 10022 TOTAL 10022
DR INTEREST ACCOUNT CR
6.
WORKING
BALANCE 10894
INTEREST = 1106
CALCULATION OF INTEREST
YEAR BALANCE RATE OF INTEREST AMOUNT OF INSTALLMENTS TOTAL
INTEREST PAYMENT
31- 10894 5% 545 3455 4000
DEC-
1998
31- 7439 5% 372 3628 4000
DEC-
1999
31- 3811 5% 191 3811 4002
DEC-
2000
TOTAL 1108 10894 12002
INTEREST OF RS 2 IS ADJUSTED IN LAST INSTALLMENT
DR VANN ACCOUNT CR
7.
SHOW MACHINE A/C MACHINERY CO LTD A/C & INTEREST SUSPENSE A/C
IN THE BOOKS OF WELLMAN CO LTD (HIRE PURCHASER)
WORKING
BALANCE 24525
CALCULATION OF INTEREST
(-)INSTALLMENT = (24507)
2493
DR MACHINE ACCOUNT CR
8.
WORKING
BALANCE 32000
CALCULATION OF INTEREST
IN THE BOOKS OF A
MACHINE ACCOUNT
DR CR
9.
REQUIREMENTS: MACHINERY A/C & MARSHALL A/ C IN THE BOOKS OF
ENGINEER (HIRE PURCHASER) FOR THREE YEARS
WORKING
BALANCE 25000
CALCULATION OF INTEREST
DR MACHINERY ACCOUNT CR
10.
WORKING
BALANCE 13000
INTEREST 1400
CALCULATION OF INTEREST
YEAR BALANCE RATE OF AMOUNT INSTALLMENT TOTAL
INTEREST OF PAYMENT
INTEREST
31-DEC-2000 13000 6% 390 2010 2400
30-JUNE-2001 10990 6% 330 2070 2400
31-DEC-2001 8920 6% 268 2132 2400
30-JUNE-2002 6788 6% 204 2196 2400
31-DEC-2002 4592 6% 138 2261 2400
30-JUNE-2003 2330 6% 70 2330 2400
DR MACHINE ACCOUNT CR
11.
RATIO OF INTEREST=5/100+5=5/105
YEAR AMOUNT DUE INTEREST CASH PRICE TOTAL
PAYMENT
31-DEC- 8400+18081=26481 26481*1/21=1261 8000 9261
1999
31-DEC- 8820+9261=18081 18081*1/21=861 8400 9261
2000
31-DEC- 9261 9261*1/21=441 8820 9261
2001
TOTAL 2563 25220 27783
CASH PRICE=25220
(+)DOWN PAYMENT=4780
DR MACHINERY ACCOUNT CR
12.
RATIO OF INTEREST=10/100+10
RATIO OF INTEREST=1/11
(+)DOWN PAYMENT=5600
DR VENDOR ACCOUNT CR
13.
WORKING
BALANCE=20000
20000*4.33+20000
86600+20000=106600
CASH PRICE=106600
14.
WORKING:
CALCULATIONS
(+)DOWN PAYMENT=10350
DR TAXI ACCOUNT CR
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
1-JAN-1999 TO AUTO SERVICE 60000 31-DEC- BY PROFIT&LOSS 12000
1999
31-DEC- BY BALANCE 48000
1999
TOTAL 60000 TOTAL 60000
1-JAN-2000 TO BALANCE 48000 31-DEC- BY PROFIT&LOSS 9600
2000
31-DEC- BY BALANCE 38400
2000
TOTAL 48000 TOTAL 48000
1-JAN-2001 BY BALANCE 38400 31-DEC- BY PROFIT&LOSS 7680
2001
31-DEC- BY BALANCE 30720
2001
TOTAL 38400 TOTAL 38400
DR AUTO SERVICE MADRAS ACCOUNT CR
15.
RATIO OF INTEREST=1/11
CALCULATION OF INTEREST
(+)DOWN PAYMENT=20000
DR CR
16.
GENRAL JOURNAL
DATE PARTICULARS DR CR
1-JAN- BUSES A/C 225000
1998 TO ARVIND MOTORS A/C 225000
(BEING PURCHASE OF 3 BUSES FROM ARVIND OF 75000 EACH)
1-JAN- ARVIND MOTORS A/C 135000
1998 TO CASH A/C 135000
(BEING PAYMENT MADE ON SIGNING CONTRACT)
31-DEC- INTEREST A/C 10800
1998 TO ARVIND MOTORS A/C 10800
(BEING INTEREST PAYABLE TO ARVIND)
31-DEC- ARVIND MOTORS A/C 40800
1998 TO CASH A/C 40800
(BEING 1ST INSTALLMENT PAID WITH INTEREST)
31-DEC- INTEREST A/C 7200
1999 TO ARVIND A/C 7200
31-DEC- ARVIND MOTORS A/C 60000
1999 TO BUSES A/C 60000
(BEING 2 BUSES REPOSSESSED BY ARVIND)
31-DEC- PROFIT&LOSS A/C 36000
1999 TO BUSES A/C 36000
(LOSS ON REPOSSESSION OF BUSES)
WORKING
INTEREST=12%
VALUE OF BUSES
VALUE OF BUSES
IN PURCHASER BOOKS=96000
17.
GENERAL JOURNAL
DATE PARTICULARS DR CR
1-APRIL- MACHINE A/C 200000
2000 TO Z.CO LTD 200000
(BEING 9 MACHINES HIRE PURCHASED FROM Z)
1-APRIL- Z.CO LTD 50000
2000 TO CASH 50000
(BEING PAYMENT MADE ON SIGNING CONTRACT)
31-DEC- INTEREST A/C 15000
2000 TO Z0.CO LTD A/C 15000
(BEING INTEREST PAYABLE TO Z)
31-DEC- Z.CO LTD A/C 65000
2000 TO CASH A/C 65000
(BEING IST INSTALLMENT PAID TO Z)
31-DEC- DEPRECIATION A/C 40000
2000 TO MACHINERY A/C 40000
(BEING DEPRECIATION CHARGED ON MACHINES)
31-DEC- PROFIT&LOSS A/C 55000
2000 TO DEPRECIATION 55000
TO INTEREST
(BEING DEP&INTEREST CHARGED TO P&L)
31-DEC- INTEREST A/C 10000
2001 TO Z.CO LTD 10000
(BEING INTEREST PAYABLE Z)
31-DEC- DEPRECIATION A/C 32000
2001 TO MACHINERY 32000
(BEING DEPRECIATION CHARGED ON MACHINERY ON
DIMISHING BALANCE METHOD)
31-DEC- Z.CO LTD 49000
2001 TO MACHINERY A/C 49000
(BEING 2 MACHINES REPOSSESSED BY Z.CO LTD)
31-DEC- PROFIT&LOSS A/C 64000
2000 TO MACHINES 64000
(BEING LOSS ON MACHINES REPOSSESSED CHARGED TO P&L)
WORKING
VALUE OF ASSETS=200000
1ST DEP=200000*20%=40000
2ND DEP=160000*20%=32000
TOTAL DEPRECIATION=72000
BOOK VALUE=200000-72000=128000
128000/4*2=64000
BOOK VALUE=64000
GENERAL JOURNAL
DATE PARTICULARS DR CR
1-APRIL- X&Y A/C 200000
2000 TO MACHINERY A/C 200000
(BEING HIRE SALE OF MACHINERY TO X&Y)
1-APRIL- CASH A/C 50000
2000 TO X&Y 50000
(BEING PAYMENT ON SIGNING CONTRACT)
31-DEC- X&Y A/C 15000
2000 TO INTEREST 15000
(BEING INTEREST RECEIVABLE BY X&Y)
31-DEC- CASH A/C 65000
2000 TO X&Y A/C 65000
(BEING 1ST INSTALLMENT RECEIVED FROM X&Y)
31-DEC- INTEREST A/C 15000
2000 TO PROFIT&LOSS A/C 15000
(BEING INTEREST TRANSFERRED TO PROFIT&LOSS)
31-DEC- X&Y A/C 10000
2001 TO INTEREST A/C 10000
(BEING INTEREST RACEIVABLE BY X&Y)
31-DEC- REPOSSESSEION A/C 49000
2001 TO X&Y A/C 49000
(BEING GOODS REPOSSESSED FROM X&Y)
31-DEC- REPOSSESSION A/C 10000
2001 TO CASH 10000
(BEING EXPENSES PAID ON REPAIRING ASSET)
31-DEC- CASH A/C 120000
2001 TO REPOSSESSION A/C 120000
(BEING CASH RECEIVED ON RESALE OF ASSET)
31-DEC- REPOSSESSION A/C 61000
2001 TO PROFIT&LOSS A/C 61000
(BEING PROFIT ON SALE OF REPOSSESSED ASSET)
WORKING
VALUE OF 2 MACHINES=100000
1ST DEP=100000*30%=30000
2ND DEP=70000*30%=21000
TOTAL DEPRECIATION=51000
BOOK VALUE=100000-51000=49000
PROFIT&LOSS
18.
REQUIREMENT: SHOW RELEVANT ACCOUNTS IN THE BOOKS OF X
(HIRE PURCHASER)
IN THE BOOKS OF X
GENERAL JOURNAL
DATE PARTICULARS DR CR
1-JULY- TRUCKS A/C 350000
2001 TO Y A/C 350000
(BEING HIRE PURCHASE OF 7 TRUCKS OF 50000 EACH)
1-JULY- Y A/C 70000
2001 TO CASH A/C 70000
(BEING PAYMENT ON SIGNING CONTRACT TO Y)
31-DEC- INTEREST A/C 7000
2001 TO Y A/C 7000
(BEING HALF YEARLY INTEREST PAYABLE TO Y)
31-DEC- Y A/C 63000
2001 TO CASH A/C 63000
(BEING 1ST INSTALLMENT 56000+INTEREST 7000 PAID TO Y)
31-DEC- DEPRECIATION A/C 35000
2001 TO TRUCKS A/C 35000
(BEING HALF YEAR DEPRECIATION CHARGED ON TRUCKS)
30-JUNE- INTEREST A/C 5600
2002 TO Y A/C 5600
(BEING HALF YEAR INTEREST PAYABLE TO Y)
30-JUNE- DEPRECIATION A/C 35000
2002 TO TRUCK A/C 35000
(BEING DEPRECIATION CHARGED ON TRUCKS FOR HALF
YEAR)
30-JUNE- Y A/C 112500
2002 TO TRUCKS A/C 112500
(BEING 3 TRUCKS REPOSSESSED BY Y)
30-JUNE- PROFIT&LOSS A/C 7500
2002 TO TRUCKS 7500
(BEING LOSS ON REPOSSESSION OF TRUCKS CHARGED TO
P&L)
WORKING
280000
FIVE INSTALLMENTS / 5
VALUE OF TRUCKS
IN PURCHASER BOOKS
3 TRUCKS 50000*3=150000
DEPRECIATION=150000*20%=300
BOOK VALUE=150000-30000=120000
IN SELLERS BOOK
50000*3=150000
DEP=150000*25%=37500
VALUE OF TRUCKS
IN PURCHASER BOOK=120000
IN THE BOOKS OF X
DR TRUCKS ACCOUNT CR
TO BALANCE 224000
TOTAL 357000 TOTAL 357000
31-DEC-2002 TO TRUCKS 112500 1-JAN-2002 BY BALANCE 224000