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Partial Repossession

Sometimes the hire vendor may not like to be harsh enough to take possession of all the items sold by him on hire purchase system. He may leave some of them in possession of hire purchaser. The vendor in the case will generally agree to take back a part of the assets at only enhanced rate of depreciation. In the case of partial repossession too, the accounting treatment is similar to one discussed in the case of full repossession, that is, the entries for interest and depreciation will be made in the books of the purchaser and the seller except of payment of installment up to date of default. However the following additional treatment must also be noted:

(i)    The hire purchaser does not close the account of the hire vendor and hire vendor does not close the account of the hire purchaser in their respective books. The entry is made with the agreed value of the asset taken away by the seller.

(ii)    The hire purchaser calculates the value of side left with him by using normal rate of depreciation. The balance c/d in the credit side of the asset account shown the depreciated amount the asset left with the hire purchaser.

(iii)    The difference in the Asset Account, after it has been credited with:

(a)    normal depreciation,

(b)    the vendor’s account (with the agreed value of the asset(s) taken away) and

(c)    balance c/d (with the value of the asset left with the hire purchaser), is transferred to the profit and loss account.

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