Repossession in Hire Purchase
Default and Repossession in Hire Purchase:
Where the buyer makes default in the payment of any installment the vendor has a right to repossess the goods sold on hire purchase and forfeit whatever amount he has already received considering it as a hire charge. There are two possibilities in repossession of goods.
- When the vendor takes back the complete repossession of asset i.e., Complete Repossession, and
- When the vendor takes repossession of only a part of the total asset sold to the hire purchaser i.e., Partial Repossession.
(I) Complete Repossession: All entries till the date of default are passed in the usual manner. The additional treatment is as follows :
Books of Hire Purchaser:
- For Closing Hire Vendor’s Account Hire Vendor’s A/cDr. To Asset A/c
- For Closing Asset Account
- If the Book value of the Asset exceeds the amount due to Hire vendor: Profit & Loss A/c
- If the book amount to Hire-vendor exceeds the book value of the
Books of Hire Vendor
- On Repossession of goodsGoods Repossessed A/c Dr. To Hire Purchaser’s A/c
- For amount spent on reconditioning of Goods RepossessedGoods Repossessed Aic Dr. To Cash A/c/Bank A/c
- For Sale of Goods RepossessedCash A/c Bank A/c Dr. To Goods Repossessed A/c
- For Loss on Sale Goods RepossessedProfit & Loss A/c Dr. To Goods Repossessed A/c
Partial Repossession: All entries till the date of default are passed in_ the usual manner. The additional treatment is an follows :
Books of Hire Vendor .
- On Repossession of Goods at an agreed valueGoods Repossessed A/c Dr. To Hire Purchaser’s A/c