Question

excess of H.P price over cash price is__
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Answer 1

Excess of hire purchase price over cash price is Interest.

• The HP system is a special system for the purchasing and selling of products, where the price of the goods is paid in parts by the buyer.

• These parts may be annual, quarterly, weekly, or even fortnightly.
• The total payment made under the system usually exceeds the cash price, which is the interest. Calculating interest is crucial since revenue is levied on the amount paid for interest and the asset is capitalised at the cash price.
• Normally, however, all parts would include a portion of the cash price and a part of the remaining balance interest.