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Accounting for Hire Purchase System Interview Questions & Answers - Learning Mode

Accounting for Hire Purchase System Interview Questions & Answers - Learning Mode

Hire-puchase system is a special system of purchase and sale of goods. Under this system purchaser pays the price of the goods in instalments. The instalments may be annual, six monthly, quarterly, monthly fortnightly etc. Under this system the goods are delivered to the purchaser at the time of agreement before the payment of instalments but the title on the goods is transferred after the payment of all installments as per the hire-purchase agreement. Under Hire Purchase System method of accounting in the books of hire-purchaser, is done on the assumption that the ownership of the asset is also transferred to the purchaser with the delivery of goods.

Try Accounting for Hire Purchase System Interview Questions & Answers - Exam Mode


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Accounting for Hire Purchase System Interview Questions & Answers - Learning Mode
Try Accounting for Hire Purchase System Interview Questions & Answers - Exam Mode
Question: What is the difference between cash price and hire purchase price?

Answer: Cash price: It is a value of goods at which the goods may be purchased by the hirer for cash.
Hire Purchase Price: The hire purchase price includes the cash price and interest to be paid on the future installment.
Question: How is hire purchase price calculated?

Answer: Hire Purchase Price= Cash Price+ Interest.
Question: What is the difference between hire purchase and installment purchase?

Answer: i)Hire Purchase System: Ownership of goods is transferred after the payment of final installment.
Installment System: Ownership of the goods passes to the buyer just by signing the agreement.
ii)Hire Purchase System: The buyer can return the goods before making the final installment.
Installment System: The buyer cannot return the goods to the seller.
Question: What is hire purchase agreement?

Answer: These are agreements whereby an owner of goods allows a person, the hirer, to hire goods from him for a period of time by paying installments. The hirer has an option to buy the goods at the end of the agreement if all installments are being paid.
Question: What is hire purchase?

Answer: A system by which a buyer pays for a thing in regular installments while enjoying the use of it. During the repayment period, ownership(title) of the item does not pass to the buyer. Upon the full payment of the loan, the title passes to the buyer. Source:
Question: What is down payment?

Answer: The initial cash payment made by the hire purchaser to the vendor at the time of signing the hire purchase agreement is referred as down payment.
Question: Who is a hirer?

Answer: The person who purchase goods from hire vendor or who obtains goods from an owner under hire purchase agreement is known as hirer or hire purchaser.
Question: Tell the formula for Hire Purchase Charge / Hire Purchase Interest.

Answer: Hire Purchase Charge/Hire Purchase Interest= Hire Purchase Price - Cash Price.

Question: Who is hire seller/ hire vendor?

Answer: A person who sells the goods to the buyer under hire purchase system is known as hire seller.
Question: What is installment purchase system?

Answer: It is a credit sale in which payments are made in installments over a period of time. In this system the buyer gets the possession as well as the ownership of the goods right at the time of signing the agreement.


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