RJ commenced business on 1 January 20X8. He sells refrigerators, all of one standard type, o  hire purchase terms. The total amount, including interest, payable for each refrigerator, is £300. Customers are required to pay an initial deposit of £60, followed by eight quarterly instalments of £30 each. The cost of each refrigerator to RJ is £200.

The following trial balance was extracted from RJ’s books as on 31 December 20X8.

850 machines were sold on hire purchase terms during 20X8. The annual accounts are prepared on the basis of taking credit for profit (including interest) in proportion to the cash collected from customers.

You are required to prepare the hire purchase trading account, and the profit and loss account for the year 20X8 and balance sheet as on 31 December 20X8.

Ignore depreciation of fixed assets. Show your calculations.

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Capital Fixed assets Drawings Bank overdraft Creditors Purchases Cash collected from customers Bank interest Wages and salaries General expenses Trial Balance £ 10,000 4,000 180,000 400 12,800 5,500 £212,700 £ 100,000 19,600 16,600 76,500 £212,700