Accounting Records In The Books Of Vendor

So far as the vendor is concerned, a hire purchase sale is just like an ordinary sale with the exception that payment is deferred over a period of time for which the vendor charged interest. He debits the Hire Purchaser’s A/c with full cash price and credit is given to Sales A/c. The interest amount is debited to Hire Purchaser’s A/c as and when the instalments become due. Instalment amounts received are credited to the Hire Purchaser’s A/c and debited to Bank A/c. The journal entries passed are as follows:


1 On sale of goods under hire purchase

Hire Purchaser A/c            Dr

To Sales A/c           

(with full cash price)


2 On receiving cash price down payment

Bank A/c                             Dr

            To Hire Purchaser A/c


3 On instalment becoming due

Hire purchaser A/c            Dr.

To Interest A/c


4 On getting payment on the due instalment

Bank A/c                             Dr.

            To Hire Purchaser A/c


With the help of above entries, you can easily prepare the Hire Purchaser’s A/c and Interest A/c.


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