A machine was purchased on the hire purchase system. Under the terms of agreement, out of the total purchase consideration,
A machine was purchased on the ‘hire purchase system’. Under the terms of agreement, out of the total purchase consideration, ₹5,600 would be paid on the siging of the agreement and the balance by 5 annual instalments of ₹3,850 each (interest being reckoned on the unpaid balance at 10% p.a.). The first instalment was paid one year after the date of purchase of the machine. Calculate the Cash down price of the machine and show the Vendor’s Account and the ‘Interest Paid’ Account in the books of the purchaser.
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