9. Hire Purchase

7/25/2019 9. Hire Purchase

1/31

1


2/31

M.com Sem -3

No. of Sessions 20 ( of 100 mins each )


3/31

To make students understand about the Concept ofire !urchase"

To he#p them to kno$ about the di%erent feature of hirepurchase

To make them understand about di%erent aspects ofhire purchase


4/31

!o$er!oint !resentations

Current &%airs Co'era(e

)nformation &bout *atest +mp#o,mentpportunities


5/31

For the conceptual grasp of FinancialServices, the students must possess thefollowing qualities or pre-requisites :-

1.hat is !nance"

#.hat are !nancial services"


6/31

& &fter readin( the course materia# the students shou#dbe ab#e to /

+p#ain the Concept of ire !urchase"

+p#ain the di%erent aspects of hire purchase

+p#ain the features of hire purchase


7/31

)ntroduction/

Hire Purchase is the #e(a# term for a contractin $hich persons usua##, a(ree to pa, for(oods in parts or a percenta(e at a time.

hen a sun eua# to the ori(ina# fu## price p#usinterest has been paid the bu,er ma, theneercise an option to bu, the (oods or returnthe (oods to the o$ner.


8/31

The ori(in of hire purchase s,stem can betraced back to the ad'ent of industria#de'e#opment in 45.

Co$per $ait 6 sons a furniture dea#erintroduced the s,stem of ire purchase in4S& in 170.

8isho(ate piano-maker introduced the s,stem

of ire purchase in 179: in 45. 7


9/31

)n )ndia ire purchase ;nance started on#,after ).

o$e'er it $as on#, after )) that it"s

(ro$th assumed 'isib#e dimensions. ith the increase in economic acti'it,man, Non-8ankin( ;nancin( companiesentered the scene in the ;fties and sities.

i(hts to parties

19


15/31

!ossession of (oods

+ach insta##ment is treated as hire char(es.

$nership

=efau#t in the pa,ment

Terminate the a(reement

1?


16/31

Spread the cost of ;nance

)nterest-free credit

i(her acceptance rates

Sa#es

=ebt so#utions

1:


17/31

!ersona# debt

@ina# pa,ment

8ad credit

Creditor harassment

>epossession ri(hts

1


18/31

The Ao'ernment of )ndia has permitted

banks to en(a(ed in hire purchase"

business on Sep- - 1


19/31

The subsidiar, of commercia# banks #ends to the dea#er

or to ;nance intermediar, $ho has a#read, ;nanced

&rtic#es so#d b, the dea#ers to the hire purchase contract.

The bank subsidiar, has to take etra precaution #ookin(to the nature of transaction under hire purchase

contract.

The bank subsidiar, $ou#d make an assessment of the

standin( and ;nancia# position of the dea#er or of the

hire purchase of compan,.

1s. 100000.

@or ire !urchaser

8ein( purchase of asset from @rench *td.D

@or ire Eendor

8ein( Sa#e of machiner, to Aopinath 6 Co.D

In the Books of HirePurchaser

In the Books of Hire Vendor

&sset aBc=r. To ire Eendor"s aBc

ire !urchaser"s aBc=r. To ire !urchase Sa#es

22

Particulars L.. !ebit "redit

Machiner, aBc=r. To @rench *td.

100000

100000


Aopinath 6 Co.=r. To Aopinath 6 Co.

100000

100000


23/31

@or makin(Brecei'in( Cash =o$n !a,ment

+amp#e/

Aopinath 6 Co. made a do$n pa,ment of >s. 90000 to@rench *td.

@or ire !urchaser

8ein( do$n pa,ment made for machiner,D

@or ire Eendor

8ein( do$n pa,ment recei'ed from Aopinath 6 Co.D23



ire Eendor"s aBc=r. To CashB8ank aBc

CashB8ank aBc=r. To ire !urchaser"s aBc


@rench *td. aBc=r. To 8ank aBc

90000

90000


8ank aBc=r. To Aopinath 6 Co.

90000

90000


24/31

@or )nterest =ue

+amp#e/

)nterest char(eab#e is 10F p.a.

@or ire !urchaser

8ein( interest due at :FD

@or ire Eendor

8ein( interest due at :FD

29



)nterest aBc=r. To ire Eendor"s aBc

CashB8ank aBc=r. To ire !urchaser"s aBc


)nterest aBc=r. To @rench *td.

3:00

3:00


8ank aBc=r. To Aopinath 6 Co.

3:00

3:00


25/31

@or !a,mentB>eceipt of ire !urchase )nsta##ment

+amp#e/

&nnua# insta##ment of >s. 20000 are to be paid.

@or ire !urchaser

8ein( pa,ment of insta##ment and interestD

@or ire Eendor

8ein( pa,ment of insta##ment and interest recei'edD

2?

In the Books of Hire

Purchaser


ire Eendor"s aBc=r. To CashB8ank aBc

ire !urchaser"s aBc=r. To )nterest aBc


@rench *td.=r. To 8ank aBc

23:00

23:00


Aopinath 6 Co.=r. To )nterest

23:00

23:00


26/31

@or char(in( depreciation&t the end of ,earD

+amp#e/

=epreciation is char(ed at 10F p.a.

@or ire !urchaser

8ein( depreciation char(ed at 10FD

2:



=epreciation aBc=r. To &sset aBc

No +ntr,


=epreciation aBc=r. To Machiner, aBc

10000

10000


27/31

@or c#osure of =epreciation aBc and )nterest aBc

+amp#e/

@or ire !urchaser

8ein( =epreciation and )nterest char(ed to !ro;t and *ossaBcD

@or ire Eendor

8ein( interest amount transferred to pro;t and #oss aBcD2



!ro;t 6 *oss aBc=r. To =epreciation aBc To )nterest aBc

)nterest aBc=r. To !ro;t 6 *oss aBc


!ro;t 6 *oss aBc =r. To =epreciation aBc To )nterest aBc

13:00

100003:00


)nterest aBc=r.

To !ro;t 6 *oss aBc

3:00

3:00


28/31

1D=o$n pa,ment p#anThe rate of interest on the hire purchase

contractis a#$a,s a Gat rate. n i #$$$.%f

nH12D =eposit #inked p#an if insta##ments are paid in ad'ance the

re#ationship bet$een ) 6 f chan(es.

n ) #$$$$$%fn-1


29/31

)NCM+ T&I &S!+CT

it is (o'erned b, centra# board of direct taesC8=TD in 1+ST >&T+ &S!+CT )t is pa,ab#e on the tota# amount of interest a((re(atin( to a

hire purchase compan, in the pre'ious ,ear at the rate of 3F. !a,ab#e amount of interest estab#ished durin( the pre'ious

,ear can be deducted from char(eab#e interest.


30/31

There is no ec#usi'e #e(is#ation dea#in( $ith hirepurchase transaction in )ndia.

The ire purchase &ct $as passed in 1


31/31

The act contains pro'isions for re(u#atin(/

1. the format B contents of the hire-purchasea(reement

2. $arrants and the conditions under#,in( the hire-purchase a(reement

3. cei#in( on hire-purchase char(es

9. ri(hts and ob#i(ations of the hirer and the o$ner.

)n absence of an, speci;c #a$ the hire purchasetransactions are (o'erned b, the pro'isions of the)ndian Contract &ct and the Sa#e of Aoods &ct.

Documents

9. Hire Purchase