2. 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…
3. AND THE STIPULATIONS ARE….
Possession of goods is delivered by the
owner thereof to a person on condition that
such person pays agreed amount in
periodical installments
The property in the goods is to be transferred
to the hirer on payment of the last installment
Such a person has a right to terminate the
agreement at any time before the property is
so transferred.
4. FEATURES OF HIRE PURCHASE SYSTEM…
The Agreement
Possession of goods
The Payment
The ownership of the goods
Each Installment
An Option to return the goods
If any Default in Payment
5. METHODS OF HIRE PURCHASE SYSTEM…
The Asset Accrual Method
Credit Purchase with Interest Method
6. 1. ASSET ACCRUAL METHOD
It is the most popular method for recording
the hire purchase. So, students are advised
to follow this method for the usual hire
purchase, unless they are instructed to follow
any other method.
7. 2. CREDIT PURCHASE WITH INTEREST
METHOD…
Under this method, entries are made in the
books of the hire purchaser, treating the
purchase of asset on hire purchase as
outright credit purchase. As such, in the
books of the hire purchaser, the asset is
debited with its entire cash price on the very
date of purchase.
8. MERITS OF HIRE PURCHASE SYSTEM….
Facility of buying
Savings
Higher Sales
Boon to small producers
9. DEMERITS OF HIRE PURCHASE SYSTEM….
Extravagance
Higher Prices
Risks to bad debts
Large Investment
11. DIFFERENCE BETWEEN HIRE PURCHASE AND
SALE…
The ownership of the goods
Price of the goods
Returning of goods
Method of payment
Kind of sale
Position of the Parties
12. 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.
13. FEATURES OF INSTALLMENT PURCHASE SYSTEM
The Agreement
Price in Installments
Possession and ownership of goods
If any default in payment
Disposal of goods
14. DIFFERENCE BETWEEN HIRE PURCHASE AND
INSTALLMENT PURCHASE SYSTEM…
Nature of Contract
Ownership
Return of goods
Right of Disposal
Rights of Seller