You are aware of the fact that with advancement of technology and improvement in the standard of living of the people both in India and abroad, the demand, for consumer durables like fridge, T.V., automobiles, etc. has increased manifold over the years. To meet this demand explosion, the dealers have come up with innovative schemes which attract the prospective consumers to purchase such goods. One such scheme is the sale on hire purchase basis.
The consumers with limited resource are naturally interested in buying under this scheme in view of the benefits of deferred payment at reasonable rate of interest. Hence, a large volume of transactions in these goods are being conducted everyday.
It should be noted that these transactions take place between a retailer (dealer) and the consumers, and not between two business units. Hence, the accounting is important only for the vendor and not the buyer. Let us now study how a hire vendor(retailer) maintain the account when goods of small value are sold on hire purchase basis.
In case of hire purchase transactions of numerous goods of small value, it becomes practically inconvenient for a particular dealer of these items to maintain separate accounts for each transaction. Hence, the accounting system is designed in such a way that overall control can be exercised on all the transactions during a particular accounting period through control accounts. However, for individual transactions, detailed record may be kept in a subsidiary book called ‘Hire Purchase Sale Register showing the necessary information as may be required to control individual accounts of the buyers.
