Question

What are the methods of calculating profit under hire purchase

transactions?​

Answer 1

Hire Purchase :— Hire purchase is an arrangement for buying expensive consumer goods, where the buyer makes an initial down payment and pays the balance plus interest in installments. ... With hire purchase agreements, the ownership of the merchandise is not officially transferred to the buyer until all the payments have been made.

Explaination :— There are two ways to record payments to the Hire Purchase company:

• Credit the full amount paid (in this case 241.66) to the hire purchase company liability account and create a journal to reduce and expense off the hire purchase interest. ...
• Make all the relevant entries at the time of recording the payment.

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Hope you understand