Ascertainment Of Profit

For the ascertainment of profit or loss on goods of small value sold on hire purchase, we have to prepare a ‘Hire Purchase Trading Account’. It is just like the Consignment Account prepared for ascertaining the profit/loss on consignment of goods invoiced at selling price. 

For preparing the Hire Purchase Trading Account, we require the amounts of goods sold on hire purchase, cash received, goods repossessed, hire purchase debtors (both at the beginning and the end), and hire purchase stock (both at the beginning and at the end).

These figures can be extracted from the Hire Purchase Sales Register or the relevant control accounts and taken to Hire Purchase Trading Account by passing the necessary closing entries in the journal. Further, we shall have to ascertain the percentage of loading and the amount of expenses incurred on hire purchase business.

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