Page 262 - Accountancy_F5

S/N Transaction Accounting entries
1. On sale of goods under Dr Hire purchaser account xx
hire purchase Cr Sales account xx
2. On receiving cash down Dr Bank/cash account xx
payment Cr Hire purchaser account xx
FOR ONLINE READING ONLY
3. When hire purchase Dr Hire purchaser account xx
interest become due Cr Hire interest account xx
4. On receiving instalments Dr Bank/cash account xx
LANGUAGE EDITING
Cr Hire purchaser account xx
LANGUAGE EDITING
On 1 January 2018, Magai Ltd. acquired a motor van from Farasi Ltd. on hire
st
purchase agreement. The terms of the contract were as follows:
(a) The cash price of the van was TZS 100, 000,000;
(b) TZS 40,000,000 was to be paid immediately on signing of the contract;
(c) The balance was to be paid in three annual instalments of TZS 20,000,000 plus
interest;
(d) Interest chargeable on the outstanding balance was 10 per cent per annum;
(e) The cost for the motor van to Farasi Ltd. was TZS 80,000,000; and
(f) Depreciation is to be written-off using the straight-line method at 20 per cent per
annum.
Required: Prepare the relevant ledger accounts in the books of Farasi Ltd. from 1
st
January, 2018 to 31 December 2020.
st

Solution 8.7
Ledger accounts in the books of Farasi Ltd
Dr Magai Ltd. Account Cr

Date Details TZS Date Details TZS
“000” “000”
01 Jan. 2018 H-purchase sales 100, 000 01 Jan. 2018 Bank - deposit 40,000
st
st
31 Dec. 2018 H-purchase interest 6,000 31 Dec. 2018 Bank -instal. 26,000
st
st
______ 31 Dec. 2018 Balance c/d 40,000
st
106,000 106,000
01 Jan. 2019 Balance b/d 40,000 31 Dec. 2019 Bank -instal. 24,000
st
st
31 Dec. 2019 H-purchase interest 4,000 31 Dec. 2019 Balance c/d 20,000
st
st
44,000 44,000
01 Jan. 2020 Balance b/d 20,000 31 Dec. 2020 Bank -instal. 22,000
st
st
31 Dec. 2020 H-purchase interest 2,000 ______
st
22,000 22,000
Student’s Book Form Five
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