Question

which account will be debited in the books of hire vendor at the time of hire sales​

Answer 1

Answer:

There are two methods for entering hire purchase transactions in the books of the hire- purchaser. The first is to enter transactions like ordinary purchases with the difference that interest is to be provided. This method recognizes the fact that the intention of the parties is to complete the purchase and to pay all the instalments. Hence, on purchase of machinery, machinery is debited and the hire vendor is credited with the cash price. When payment is made, the hire vendor is debited. At the end of each financial year, interest is credited to the hire vendor and debited to Interest Account. Depreciation is charged in the ordinary manner.

Answer 2

At the time of hire sales the account debited will be the purchaser's account with full price.

• The hire-vendor identifies the selling of the lease purchase as an ordinary selling.
• With the full cash price, the hire purchaser is debited and the Sales account is credited. Interest is debited as instalments are due to the hire purchaser.
• The cash earned is credited to the buyer of the lease.
• The journal entry for the same is -

Hire Purchaser Account Dr.

To Hire Sales  A/c

(Being the entry for sales under hire purchase)