Question

mention the necessary entries in the books of the buyer as well as the seller when goods are sold on the hire purchase system

Answer 1

purchase account debit to cash account and cash account debit to sales account

Answer 2

Journal Entries in the books of Hire Purchaser

When goods purchased

Asset A/C DR

             To Hire Seller A/C

( Being goods sold on hire purchase system )

When down payment paid

Hire  Vendor A/C DR

         To Cash A/C

( Being down payment paid by Cash )

When interest due

Interest A/C DR

      To Hire Vendor A/C

( Being interest due )

When interest and part is paid

Hire Vendor A/C DR

           To Cash A/C

( Being interest and part paid )

Journal Entries in the books of Hire Vendor / Seller

When goods sold

Hire Purchaser A/C DR

               To Sales A/c

( Being goods sold on the hire purchaser )

When down payment recieved

Cash A/C DR

          To Hire Purchaser A/C

( Being down payment recieved )

When interest due

Hire Purchaser A/C DR

         To Interest A/C

( Being interest due )

When interest and part is recieved

Cash A/C DR

         To Hire Purchaser A/C

( Being interest and part recieved )