Full Repossession

In this case the following accounting procedure is adopted:

Books of the hire purchaser:

(i)    All entries except the entry for payment of installment are made in the usual manner up to the date of default, In other words, the entries or interest (i.e., when installment becomes due) and the depreciation are made as usual up to the date of default. This is so because default is committed only for non-payment of the installments.

(ii)    The hire purchaser closes the account of the hire vendor first by debiting his account and crediting the account of the asset with the amount outstanding in the account of the seller. This is based on the simple rule of the double-entry book-keeping. Debit the receiver and Credit what goes out.

(iii)    Any balance left in the asset account is transferred to Profit and Loss Account and then the asset account is closed.

Books of the hire vendor:

(a)    All entries except the entry for the receipt of the installment are made in the usual manner up to date of default.

(b)    The hire vendor would close first the account of the purchaser by debiting the Goods Returned or Goods Repossessed Account and crediting the account of Hire Purchaser.

(c)    Goods Returned or Goods Repossessed Account, a newly opened account, would be further debited with the expenses paid on the repairs of the goods repossessed and credit with the cash actually received on the resale. Any balance left in Goods Repossessed Account, being profit or loss on resale, is transferred to Profit and Loss Account.

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