Page 249 - Accountancy_F5

Solution 8.1

Hire purchase interest payable per instalment TZS
Hire purchase price 19,500,000
Less: Cash price 18,000,000
Total hire purchase interest 1,500,000
FOR ONLINE READING ONLY
Number of instalments 5
Hire purchase interest payable per instalment 300,000

Analysis of instalments in TZS

Cash price Principal Interest Total Closing
Date outstanding instalment
TZS TZS TZS TZS TZS

01 Jan. 18,000,000 3,000,000 - - 15,000,000
st
2024
31 Dec. 15,000,000 3,000,000 300,000 3,300,000 12,000,000
st
2024

31 Dec. 12,000,000 3,000,000 300,000 3,300,000 9,000,000
st
2025

31 Dec. LANGUAGE EDITING balance
st
300,000
3,300,000
9,000,000
3,000,000
6,000,000
2026
31 Dec. 6,000,000 3,000,000 300,000 3,300,000 3,000,000
st
2027
31 Dec. 3,000,000 3,000,000 300,000 3,300,000 -
st
2028
TOTAL 18,000,000 1,500,000 16,500,000 -

Actuarial method for apportioning hire purchase interest
The actuarial method allocates the total hire purchase interest by applying the interest rate
on the remaining balance of the cash price, after the down payment has been deducted.
The following Example 8.2 serves as an illustration of this process.

Student’s Book Form Five
236

23/06/2024 17:36
ACCOUNTANCY_DUMMY_23 JUNE.indd 236 23/06/2024 17:36
ACCOUNTANCY_DUMMY_23 JUNE.indd 236