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Hire Purchase Facts

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					You Can Buy On Hire Purchase
Hire purchase is more like a contract for the acquisition of an asset, which contains a
provision giving the hirer an option to acquire legal title to the asset upon the fulfillment
of certain conditions stated in the contract. This is most times in accordance with
statement of accounting standard (SAS21). Under this contract, the buyer pays the owner
of the property a number of installment until the full price of the asset is paid, when the
owner of the property will either pass automatically to the hirer the asset or he will
exercise an option to purchase the property by the payment of a stated sum. Note that the
legal ownership of the asset still remains the seller until the hirer fully balances the price,
according to the contract between them. Payment under this contract is usually made
installmentaly while the buyer takes the possession of the asset on the payment of final
installment; this is the beauty of the business. The owner may repossess the property if
the buyer fails to pay any of the installment when due. However, the hire vendor can
not take possession of the asset or chalet if the hirer had made 3/5 of the payment
under the contract, this clause applies in case of motor vehicle. 1/2 of the payment
under the contract, in case of other goods. Where relevant payment has been made
before the buyer defaults, the option left for the buyer is to sue the seller or the hire
vendor.
        The accounting reality of hire purchase is that the hirer takes possession of the
asset, uses it as his property pay for it, maintain it and as contracted to buy it giving this
principle, as generally agreed, that the buyer should record the property on hire purchase
contract as a fixed asset purchased with deferred payment. On the other hand the vendor
should treat the transaction as an outright sale with differed revenue to be recognized
over the period of the agreement. You really don’t have to be very confused buying your
goods on deferred payment which is also buying in hirer purchase. Follow the right steps
as agreed by your vendor and reach an agreement as to the payment of money and you
can acquire that asset you think you need very urgently. Be very prudent about it.

				
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posted:9/4/2012
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