1HirePurchaseAndSaleTransactionsPart3

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Hire Purchase and

Installment Sale Transactions

Part 3

IPCC Paper 1 Accounting Chapter 11

Prof. Deepak Jaggi

The Insti tute of Chartered Accountants of India

Recording Date: May 24, 2013


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1 This lecture has been delivered by faculty members to supplement the

Study Material, Practice Manual and other content

2 The views expressed in this lecture are of the Faculty Member.

3

The content of this video lecture has not been specifically discussed

by the Council of the Institute or any of its Committees and the viewsexpressed herein may not be taken to necessarily represent the viewsof the Council or any of its committees

Disclaimer Statement

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The e-Lectures, PPT, Podcastsand Video lectures on ICAI

Cloud Campus aim tosupplement the Study Material,

Practice Manual and

Supplementary Study Material

The lecture recordings are madeaccording to the syllabus andlaws existing/ applicable as on

the date of recording.

Due to changes in law, there islikely to be some time gap

between these changes and therecording of updated lectures.

Hence, students are advised torefer to the Study Material

including Supplementary StudyMaterial, if any, and other

relevant legislation for latestprovisions/ amendmentsrequired for forthcoming

examination.

Important Notes This e-Lecture was Recorded on:May 24, 2013

3 ICAI, 2013


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Learning Objectives

(1) Understand the meaning of stock anddebtors method

(2) To Lay a foundation of accountingtreatment in case of stock and debtorsmethod

(3) To gain the ability to solve problemsrelating to final accounts under stock anddebtors methods

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Stock & Debtors Method

H.P. Stock A/c (At H.P. Price)

H.P. Adjustment A/c (Profit/Loss)

H.P. Debtors A/c (For HP Sales)

Shop Stock A/c (At Cost)

Repossessed Stock A/c ICAI, 2013


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Entries

(1) For Goods sent on HP

(a) H.P. Stock A/c .... Dr.To Goods sent on HP

(b) Goods sent on HP A/c ....Dr. (HP Price)To Shop Stock A/c (Cost Price)

To HP Adjustment A/c (Profit)

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Entries Continued

2. For H.P. Sales

(a) For cash received from HP debtors

Cash / Bank A/c .. Dr.

To HP Debtors A/c

(b) For HP Sales DoneHP Debtors A/c.. Dr.

To HP Sales A/c

(c) For Transfer

HP Sales A/c Dr.

To HP Stock A/c

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Entries Continued

3. For Stock Reserve

(a) For Closing Stock Reserve

HP Adjustment A/c ..

To Stock Reserve A/c

(b) For Opening Stock Reserve

Stock Reserve A/c Dr.To HP Adjustment A/c

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Entries Conti..

4. For Repossessed Stock

(a) For Unpaid Installment

Repossessed Stock A/c .. Dr. (Unpaid Amt)

To HP Debtors A/c (Inst. Due in Current Year)

To HP Stock A/c (Future Installment)

(b) For Loss on Repossession

HP Adjustment A/c Dr.To Repossessed Stock A/c

Amt = Difference between Unpaid Installment &Agreed Value

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Entries Conti..

5. For Balance in HP Adjustment A/c

(it is GP of HP Trading

HP Adjustment A/c . Dr.

To Profit & Loss A/c

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Question No.1Kailash Brothers have a hire purchase department, which sells goods at cost plus

50%. From the following information, you are required to ascertain the profit madefor the year ended 30thSeptember 2007.

Stock on hire with customers at Selling price as on 30 thSeptember,

2006

Stock at shop at cost as on 30thSeptember, 2006

Installments due as on 30thSeptember, 2006

Cash received from customers

Goods repossessed (installments due 6,000)

Installment due from paying customers

Closing Stock at shop (including repossessed goods )

Purchased made in the year

27,000

54,000

15,000

1,80,000

1,500

27,000

61,500

1,80,000

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Solution No.1

H. P. Stock A/c

To Bal B/d

To Goods sent on HP

(174000+87,000)

27,000

261000

To HP Sales

By Re-Possessed

stock A/c

By bal c/d

192000

6,000

90000

288000 2,88,000 ICAI, 2013


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Solution Continued

H. P. Adjustment A/c

To re-possessed stock

To Stock reserve

To P&L a/c

45,00

30,000

61,500

By Stock Reserve

By gods sent on HP

(1,74,000 /2)

9,000

87,000

96,000 96,000

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Solution Continued

H.P. Debtors A/c

To Balance b/d

To H.P. Sales

15000

1,92,000

By Cash /Bank A/c

By C/d

180000

27,000

20,7000 2,07,000

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Stock Shop A/c

To Balance b/d

To Purchases

54,000

180000

By goods sent at HP

By Balance c/d

1,74,000

60,000

234000 2,34,000

Repossessed Stock A/c

To HP Stock A/c 6,000 By H. p. Adjustment

By Balance c/d

4,500

1,500

6,000 6,000

Solution Continued

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Lesson Summary

Accounts prepared under stock and debtors method

HP Stock A/c At HP Price

HP Adjustment A/c Loading Factor

HP Debtors A/c For HP Sales

Shop Stock At Cost Price

Repossession A/c

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Thank You

ICAI 2013

1HirePurchaseAndSaleTransactionsPart3

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