Treatment of Hire Purchase - Help

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
:oops: This is probably simple, but if you have a van that is on HP and you pay a deposit then a monthly charge, should the D/C be bank & general purchases or should it go to the asset 'or' is this not an asset until its all paid for.

Am I answer my own question? I just wanted to be sure I suppose. any suggestions.

cheers
T

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Treatment of Hire Purchase - Help

    The debit will be the van asset account and the credit will be a hire purchase account. The asset needs to be recognised as soon as it is acquired by the business and it has not been paid for yet, so the hire purchase account is opened.

    When the monthly payments come out they are credited to the bank and debited to the hire purchase account.

    Annette
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Treatment of Hire Purchase - Help

    :D

    cheers for that it makes sense now. I was a little confused how to treat the van but when I checked the SSAP 21 it states that it should show on the balance sheet.

    cheers
    T

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