Books of hire-vendor
In case of default by hire-purchaser, the hire-vendor debits the hire-purchaser’s account with interest becoming due but naturally does not pass entry for receipt of the instalment. When he ,repossess~s the goods due to default, he periscope, Goods Repossessed Account and, debits it ants , credits the hire-purchaser’s account with the estimated value of goods repossessed. Any balance’ left in hire-purchaser’s account is transferred as profit or loss, as the case may be prepossession of goods to Profit & Loss Account.
Then Goods Repossessed Account is debited with the amount of expenses, if any, incurred . on repairs, repacking etc. of the goods repossessed in order to make them suitable for resale. The account is credited with the sale proceeds of the goods on their resale. Any balance left in Goods Repossessed Account after disposal of all the ‘goods represents profit or loss and is transferred to Profit & Loss Account. In the examination, if estimated value of the goods at the time of their repossession is not given ‘the amount due from the hire-purchaser should be assumed to be the estimated value. Thus, in such..a case the hire-purchaser’s account will not show any profit orloss on repossession of goods.
On the basis of particulars given in the immediately preceding illustration, prepare important ledger accounts in E.C. Ltd.’s books of account. Assume that the estimated value of the T.V set at the time of repossession-was Rs. 12,QOOand after an expenditure of Rs. 850 on repairs, repacking etc. to give the T.V. set a new-look, -,the company resold it on 6th December, 199? for cash to o~e of its employees at a special discount of 10 per cent on cash price i.e. for Rs. 13,500. Also assume RC. Ltd closes its books of accounts’ every year on 31st March.