Question

5
.
The cost of goods sold on hire purchase is
transferred to
Sales account
(b)
Purchases Account
(c)
Hire purchase Trading Account
(d)
None​

Answer 1

Answer:

answer - d

Explanation:

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Answer 2

Answer:

The cost of goods sold on hire purchase is transferred to Sales account

The hire-vendor handles the hire purchase sale just like any other kind of transaction. He credits the Sales Account and debits the hire purchaser for the entire cash sum.

Explanation: More about Hire Purchase Agreements is explained below

Hire purchase contracts are comparable to rent-to-own arrangements, such those for rent-to-own cars, where the lessee has the option to purchase at any time throughout the term of the contract. Similar to rent-to-own, hire purchase lets customers with bad credit stretch the expense of pricey things they otherwise couldn't afford over a longer period of time. However, it differs from extending credit because the buyer doesn't actually own the goods until all payments have been made.

Hire purchase contracts are not regarded as a credit extension.

Ownership does not pass to the buyer under a hire purchase arrangement until all payments have been made.

In most cases, hire purchase contracts end up costing more in the long term than outright purchases.

Following are the advantages in Hire Purchase Agreement:

Similar to leasing, hire buy contracts let businesses with insufficient working cash use their assets. Due to the fact that the payments are recorded as expenses, it may also be more tax-efficient than ordinary loans. However, any tax benefits from depreciation will outweigh any savings.

Hire purchase agreements may be used by companies that need expensive machinery, such as those in the construction, manufacturing, plant hire, printing, road freight, transport, and engineering sectors, as well as by start-ups with limited collateral for establishing credit lines.

A hire purchase arrangement can boost a business' return on assets and return on capital employed (ROCE) (ROA). This is due to the fact that the business doesn't have to utilize as much debt to purchase assets.

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