Important Terminologies Of Accounting For Hire Purchase System

1. Hire seller/Hire vendor/Owner

A person who sells the goods to the buyer under hire purchase system is known as hire seller.

2. Hirer/Hire purchaser/Hire buyer

The person who purchase goods from hire vendor or who obtains the goods from an owner under hire purchase agreement is known as hirer.

3. Cash price/Cash value

It is a value of goods at which the goods may be purchased by the hirer for cash.

4. Down Payment

The initial cash payment made by the hire purchaser to the vendor at the time of signing the hire purchase agreement is referred as down payment.

5. Hire Purchase Price

The hire purchase price includes the cash price and interest to be paid on the future installment. It is the total sum payable by the hirer to the vendor.

6. Hire Purchase Charge

The difference between the hire purchase price and the cash price as stated in the hire purchase agreement is known as hire purchase charge.