Hire Purchase and Instalment Payment Systems Overview
Concepts of hire purchase and instalment payment systems in financial accounting. Learn about hire purchase agreement, features, methods, merits, demerits, differences with sale, and installment purchase system. Understand how possession and ownership of goods are transferred under these systems.
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Presentation Transcript
HIRE PURCHASE SYSTEM AND INSTALMENT PAYMENT SYSTEM Subject:-Financial Accounting Class:- B.com ist (Sem:-2nd) College:-IB(PG)College,panipat (Affiliated to kurukshetra university)
HIRE PURCHASE AGREEMENT Hire Purchase Agreement means an agreement under which goods are let on hire and under which the hirer has an option to buy the goods as per terms of the agreement It includes few stipulations
AND THE STIPULATIONSARE . Possession of goods is delivered by the owner thereof to a person on condition that such person pays agreed amount in periodical instalments. The property in the goods is to be transferred to the hirer on payment of the last instalment Such a person has a right to terminate the agreement at any time before the property is so transferred.
FEATURES OF HIRE PURCHASE SYSTEM 1. The Agreement 2. Possession of goods 3.Payment in instalments 4.The ownership of the goods 5.Right of the hirer to purchase with rebate. 6.Liability of hire-purchaser to keep the goods in good condition.
METHODS OF HIRE PURCHASE SYSTEM The Asset AccrualMethod Total Asset value Method
MERITS OF HIRE PURCHASE SYSTEM . Facility of buying Savings Higher Sales Boon to small producers
DEMERITS OF HIRE PURCHASE SYSTEM . Higher Prices Risks to bad debts Large Investment
INSTALLMENT PURCHASE SYSTEM Under Installment Purchase system, the possession as well as ownership passes from the seller to the buyer immediately on entering the agreement but the buyer agrees to pay the total price in installments. If the buyer makes any default in the payment of any installment, the seller has no right to repossess the goods. The seller can file a suit in the court of law for recovery of the price.
FEATURES OF INSTALLMENT PURCHASESYSTEM The Agreement Price in Instalments Possession and ownership of goods If any default in payment Disposal of goods
DIFFERENCE BETWEEN HIRE PURCHASE AND INSTALLMENT PURCHASESYSTEM
