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on 1 January 2018 at a cash price of TZS 60,000,000. Out of the cash price, TZS
st
15,480,000 was to be paid as a down payment and the balance in five instalments
of TZS 10,000,000 each. The rate of interest is charged at 4 per cent per annum.
Karim Traders could only pay the first instalment. Sokoni Ltd. repossessed the
furniture which were revalued by charging depreciation at 15% per annum on a
straight line method. Sokoni Ltd. incurred TZS 1,500,000 to recondition the goods
FOR ONLINE READING ONLY
and then, sold them at TZS 45,000,000.

Required: Open the ledger accounts in the books of Sokoni Ltd.

Financial statements on hire purchase
LANGUAGE EDITING
In the hire purchase business, financial statements are also prepared at the end of each
accounting period. These include the hire purchases income statement (or the profit and
loss statement) and a statement of financial position. A hire purchase income statement is
prepared to ascertain profit or loss on goods sold on a hire purchase business. A statement
of financial position is prepared to show assets, liabilities and owners’ equity.

Example 8.11
Juakali Plc. commenced business on 1 January 2015. The company sells television
st
sets, on hire purchase terms. The hire purchase price including interest is TZS 900,000
for each television set. A customer is required to pay an initial deposit of TZS 225,000
followed by twelve months instalment of TZS 56,250 each. The cost of each television
set to Juakali Plc. is TZS 600,000. The following trial balance was extracted from
Juakali Plc.’s books as 31 December 2021:
st
Trial balance as at 31 December 2021
st
Details Debit Credit
TZS TZS
Ordinary share capital 75,000,000
Non-current assets 7,500,000
Purchases 300,000,000
Annual revenue 180,000,000
Wages and salaries 9,000,000
General expenses 1,125,000
Creditors 18,750,000
Bank overdraft 44,250,000
Bank charges 375,000
318,000,000 318,000,000

Student’s Book Form Five
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