Hire Purchase System

Learn Hire Purchase System in Advance

Udemy

platform

हिन्दी

language

Accounting & Bookkeeping

Why take this course?

🏫 Master Hire Purchase & Installment Payment Systems with Expert Dr. Mohd Saifi Anwar TDM-420: Hire Purchase System - Advanced Insights for Smart Financial Planning

Course Headline:

Unlock the Secrets of Effective Finance Management with Our Advanced Hire Purchase System Online Course!

Introduction to Hire Purchase System

Understanding the core concept behind the Hire Purchase (HP) system is essential for anyone looking to navigate the world of consumer finance. This course will delve into the nuances of HP, exploring its role as a financial tool that benefits middle-class consumers by allowing them to purchase goods on installment payment plans.

Types of Sales 🡲

Cash Sales: A straightforward transaction where full payment is made immediately for goods or services.
Credit Sales: Goods or services are bought on credit, with an agreement to pay at a later date.
Hire Purchase System: Similar to credit sales, but the ownership of the goods is transferred after the final installment is paid.
Installment Payment System: A system where consumers can purchase goods by paying in parts over time.

Characteristics or Advantages of Hire Purchase System 🚀

For Middle Class Family: Tailored for those who cannot afford to pay the full price at once.
Payment in Installments: Spreads out the cost over a period, making it more manageable.
Delivery at Once: Goods are delivered immediately upon agreement.
Ownership Not Transferred Initially: The purchaser uses the goods but does not own them until the last installment is paid.
Repair Responsibilities: The seller is responsible for repairs if the damage is not the fault of the purchaser.
Repossession in Case of Non-Payment: If the purchaser fails to make payments, the seller can reclaim the goods.
No Money Refund: Payments made are non-refundable once the purchaser has entered into the HP agreement.
Ownership Transferred After Last Installment: Upon completion of all installments, the purchaser becomes the legal owner of the goods.

Meaning of Installment Payment System 💹

The Installment Payment System is another consumer finance option that allows for the purchase of goods with immediate delivery and ownership transfer upon full payment, but with the advantage of paying over time. In case of non-payment, the matter is settled in court rather than through repossession. Upon final payment, the purchaser receives a No Objection Certificate (NOC).

Difference Between Hire Purchase System and Installment Payment System 🌟

While both systems allow for goods to be purchased over time, the key differences lie in the timing of ownership transfer, repair responsibilities, and methods of handling non-payment.

Important Terms & Concepts 📚

Hire Purchaser: The person who hires goods with an option to purchase.
Hire Vendor: The seller who lets out the goods under HP agreement.
Cash Price: The total price of the goods without any credit terms.
Hire Purchase Price: The amount to be paid by the purchaser under the HP agreement, including interest.
Down Payment: An initial payment made at the start of an installment plan.
Installment Including Interest: Payments that cover both the cost of the goods and the agreed-upon interest rate.
Installment Without Interest: Payments for the cost of the goods only, over time.
When Interest Rate Is Not Given: Special cases where installment amounts and periods are standardized.
Cash Price Not Given: Methods like Annuity or Back Calculation to determine the total price.
Algebraic Method: A calculation method used when there is no predetermined interest rate.
Book of Hire Vendor: Financial records kept by the seller.
Journal Entries In The Books Of Hire Vendor (Seller): Accounting entries for HP transactions.
Books of Hire Purchaser: Records maintained by the purchaser.
Repair Reserve A/c Or Maintenance Suspense A/c: Accounts used to set aside funds for maintenance and repair.
Higher Purchase System 📈: This system is similar to HP but differs in terms of ownership transfer and repossession rights. Under this system, the purchaser hires the goods because ownership is still pending with the seller. The key features include installment payments, deferred ownership transfer, and the right of the seller to repossess in case of default.