BCom 1st Year Financial Accounting Hire Purchase Instalment Payment System Study Material Notes
BCom 1st Year Financial Accounting Hire Purchase Instalment Payment System Study Material Notes: In this post BCom 1st Year Financial Accounting Hire Purchase Instalment Payment System Study Material Notes provide full theory sample questions and exercise. a2znotes.com describe the hire purchase, instalment payment system clearly.
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Hire purchase is the system under which the property is acquired by the payments made in instalments. These instalments may be monthly quarterly, half-yearly or yearly. Every hire purchase agreement shall state the number of instalments by which the hire purchase price is to be paid and each amount of each of these instalments. Under this system, the possession of the goods is transferred to the hire purchaser on signing the agreement but the hire purchaser does not become the owner of the goods till he has paid the stipulated number of instalments. If the hire purchaser makes default in payment of any instalment, the hire vendor (seller) can take back the goods from the hire purchaser without requiring to refund the amount already received by him because the amount is considered to be the hire charge (rent) of the goods for the period for which the goods have already been with the hire purchaser. Therefore, this system is known as Hire Purchase System. Thus, the seller is called a Hire Vendor and a buyer as Hire Purchaser.
Definitions of Hire Purchase System
According to J.R. Batliboi, ‘‘Under the Hire Purchase System, goods are delivered to a person, so agrees to pay the owners by equal periodical instalments, such instalments 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.
Characteristics of Hire Purchase System
The following are the salient characteristics of the hire purchase system
1. Payment is made in instalment
2. Right to use the goods by the buyer
3. Seller remains the owner of the goods
4. Duty to the reasonable care of goods delivered to hire purchase