Definitions According to JR Batliboi Under the Hire Purchase System goods are delivered to a person who agree to pay the owners equal periodical instalment such instalment to be treated as hire of those goods until a certain fixed amount has been paid when these goods become the property ID: 557295
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Slide1
Hire Purchase and Installment Payment Systems.Slide2
Definitions
According to J.R. Batliboi “Under the Hire Purchase System, goods are delivered to a person, who agree to pay the owners equal periodical instalment, such instalment to be treated as hire of those goods, until a certain fixed amount has been paid, when these goods become the property of the hirer.Slide3
Characteristics of Hire Purchase System
Sale of Goods on Credit.
Payment in Instalments.
Right of Possession and Use of Goods.
Ownership of Goods.Slide4
Characteristics of Hire Purchase System
5. For not making the payment of Instalmnet.
a. Right of Repossession of Goods to the Seller.
b. Forfeiture of Received Instalments.
c. Right of receiving the Oustanding Instalment.Slide5
Characteristics of Hire Purchase System
Responsibility of Maintenance of Goods in good Condition.
Responsibility for Repairs.
No right to Sell or Pledge the Goods.Slide6
Advantages of Hire Purchase System
Advantages to Buyer
Advantages to Seller
Advantages to SocietySlide7
Advantages to Buyer
East method of Payment.
Purchases of Valuable Goods.
Encouragement to Savings.
Free repairs.Slide8
Advantages to Seller
Increase in Sales.
Increase in Income.
Easy realisation of Instalments.
Close relation between Buyer and Seller.
Possibility of Sale of Other goods.Slide9
Advantages to Society.
Increase in Production
Increase in Employment
Increase in Standard of Living.Slide10
Disadvantages of Hire Purchase System
Disadvantages to Purchaser.
a. High Price
b. Fear of Repossession of Goods.
c. Purchase of Unnecessary Goods.
d. No Ownership on Goods.
e. Mental Disturbance.Slide11
Disadvantages of Hire Purchase System
Disadvantages to Seller.
a. Need of More Capital
b. Difficulty in Realising Instalments.
c. Difficulty in Repossession of Goods.
d. More expenditure on Accounting.
e. Bear of Loss of Depreciation of goods.Slide12
Disadvantages of Hire Purchase System
Disadvantages to Society
Slide13
Difference between Hire Purchase System and Credit Sale
S.No.
Basis of Difference
Hire Purchase
Credit Sale
1.
Act
Purchase Act 1972
Sales of goods Act,1930
2.
Nature of Contract
Hire purchase contract
Contract of Sale
3.
Mode of payment
Installment
Cash
4.
Transfer of Ownership
After the payment of last installmnet.
On signing the contract of Sale
5.
Right of repossession of Goods
Default in the payment.
Cannot repossess the goods.
6.
Repair of Goods
Vendor
Purchaser
7.
Right to Sell or Pledge the Goods
No right to sell or pledge the goods
Sell or Pledge.
8.
Termination of Contract
Purchaser can terminate the Contract
Purchaser cannot terminate the contract.Slide14
Hire Purchase Price
Cash Price + Total Interest = Hire Purchase PriceSlide15
Necessary Accounts in the Books of Hire Purchaser
Assets Account
Vendor’s A/c
Interest Account.
Depreciation Account.Slide16
Necessary Accounts in the Books of Vendor
Purchaser’s Account.
Interest Account.Slide17
Calculation of Interest
Particulars
(2) Cash Price
(3) Principal
(4) Interest
(5) Instalment
Particulars about Instalments
Cash Price of the Assets
Amount of instalment excluding Interest
Amount of Interest
Amount of instalment including interestSlide18
Instalment Payment System
Instalment payment system like hire purchase system is a system of sale in which the payment is made in instalment. Under this system, the buyer becomes the owner of the goods immediately on signing the contract of sale. If the buyer makes default in the payment of instalment, then the seller cannot reposses the goods. He can only sue the buyer for unpaid instalments. Slide19
Definition of Instalment Payment System
“ Under an agreement to purchacse and pay by instalments, the goods become the property of the purchaser immediately when he receives the delivery of the same”
J. R. Batliboi.Slide20
Characteristics of Instalment Payment System
Contract of Credit Sale.
Payment in Instalments.
Transfer of Ownership
Delivery of Goods.
In case of default of payment of instalment.
Right of Sale or Mortgage of Goods.