Recording Date: May 24, 2013

Hire Purchase and

Installment Sale Transactions
Part 3
IPCC Paper 1 Accounting Chapter 11
Prof. Deepak Jaggi

The Institute of Chartered Accountants of India

Disclaimer Statement

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This lecture has been delivered by faculty members to supplement the

Study Material, Practice Manual and other content

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The content of this video lecture has not been specifically discussed
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Important Notes

This e-Lecture was Recorded on:

May 24, 2013

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Learning Objectives

(1) Understand the meaning of stock and

debtors method
(2) To Lay a foundation of accounting
treatment in case of stock and debtors
method
(3) To gain the ability to solve problems
relating to final accounts under stock and
debtors methods
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Stock & Debtors Method

H.P. Stock A/c (At H.P. Price)
H.P. Adjustment A/c (Profit/Loss)
H.P. Debtors A/c (For HP Sales)
Shop Stock A/c (At Cost)
Repossessed Stock A/c
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Entries
(1) For Goods sent on HP
(a) H.P. Stock A/c .... Dr.
To Goods sent on HP

(b) Goods sent on HP A/c ....Dr. (HP Price)

To Shop Stock A/c (Cost Price)
To HP Adjustment A/c (Profit)

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Entries Continued
2. For H.P. Sales
(a) For cash received from HP debtors
Cash / Bank A/c .. Dr.
To HP Debtors A/c

(b) For HP Sales Done

HP Debtors A/c.. Dr.
To HP Sales A/c
(c) For Transfer
HP Sales A/c Dr.
To HP Stock A/c

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Entries Continued
3. For Stock Reserve
(a) For Closing Stock Reserve
HP Adjustment A/c ..
To Stock Reserve A/c

(b) For Opening Stock Reserve

Stock Reserve A/c Dr.
To HP Adjustment A/c

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Entries Conti..
4. For Repossessed Stock
(a) For Unpaid Installment
Repossessed Stock A/c .. Dr. (Unpaid Amt)
To HP Debtors A/c (Inst. Due in Current Year)
To HP Stock A/c (Future Installment)

(b) For Loss on Repossession

HP Adjustment A/c Dr.
To Repossessed Stock A/c
Amt = Difference between Unpaid Installment &
Agreed Value

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Entries Conti..
5. For Balance in HP Adjustment A/c
(it is GP of HP Trading

HP Adjustment A/c . Dr.

To Profit & Loss A/c

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Question No.1
Kailash Brothers have a hire purchase department, which sells goods at cost plus
50%. From the following information, you are required to ascertain the profit made
for the year ended 30th September 2007.

Stock on hire with customers at Selling price as on 30th September,

27,000

2006

54,000

Stock at shop at cost as on 30th September, 2006

15,000

Installments due as on 30th September, 2006

Cash received from customers

1,80,000
1,500

Goods repossessed (installments due 6,000)

27,000

Installment due from paying customers

61,500

Closing Stock at shop (including repossessed goods )

Purchased made in the year
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1,80,000

Solution No.1
H. P. Stock A/c
To Bal B/d

27,000 To HP Sales

To Goods sent on HP

261000 By Re-Possessed

(174000+87,000)

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288000

192000

stock A/c

6,000

By bal c/d

90000

2,88,000

Solution Continued
H. P. Adjustment A/c
45,00 By Stock Reserve

9,000

To Stock reserve

30,000 By gods sent on HP

87,000

To P&L a/c

61,500 (1,74,000 /2)

To re-possessed stock

96,000

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96,000

Solution Continued
H.P. Debtors A/c

To Balance b/d
To H.P. Sales

15000 By Cash /Bank A/c

1,92,000 By C/d
20,7000

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180000
27,000
2,07,000

Solution Continued
Stock Shop A/c
To Balance b/d

54,000 By goods sent at HP

To Purchases

180000
By Balance c/d
234000

1,74,000

60,000
2,34,000

Repossessed Stock A/c

To HP Stock A/c

6,000 By H. p. Adjustment
By Balance c/d
6,000

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4,500
1,500
6,000

Lesson Summary
Accounts prepared under stock and debtors method
HP Stock A/c At HP Price
HP Adjustment A/c Loading Factor
HP Debtors A/c For HP Sales
Shop Stock At Cost Price
Repossession A/c

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Thank You

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