|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
About Us
 Advertise with Us Contact UsAll Content © Copyright Buildingtrade.org.uk 2005 Affiliate Link : sapling.org.uk |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
What Is the Difference Between Margin and Markup?
,
eHow Contributor
What Is the Difference Between
Margin and Markup?
Margin (or gross margin) and markup are two different ways of
expressing the difference between the cost of a product and its sale price.
However, margin and markup are computed differently and are used for different
purposes, depending on which is more suitable. Most small businesses use markup
formulas, but many neglect margin. That's a mistake, according to business
consultants, since using margin as a tool for analysis helps improve profitability.
It's well worth the time for any businessperson to know the difference between
margin and markup and how to use both.
Other People Are Reading
1. Identification
o
Markup is the amount (usually expressed as a
percentage) that is added to the cost of a good to set the selling price. For
example, if an item costs $10 and the markup percentage is 50 percent, you add
$10 (50 percent) or $5 to get a price of $15. The margin of a good that has a
$15 price and a cost of $10 is the price minus the cost (in this example, $5).
Express this as margin percentage by dividing the margin by the price and then
multiplying by 100. Our $5 margin divided by the $15 price (times 100) yields a
margin percentage of 33 percent.
Significance
o
Margin and markup have different uses.
Generally, a markup formula is used to set the price of a product. It's a
simple and easy way to guide sales personnel and managers. Margin is more
useful for analyzing sales and expenses. Typically, you use data from a given
period (such as the previous calendar quarter) to determine how much margin is
required for existing sales volume to cover added expenses plus an adequate
profit. The goal is to use margin analysis to adjust prices and determine what
your markup formula should be.
See how a commission tracking system
can boost your revenue!
Features
o
The cost of a product is a common factor for
both margin and markup. It consists of the purchase price of the item (raw
materials) plus labor and may include items like breakage allowance. Cost does
not include other expenditures such as rent, administrative salaries and office
expenses. A margin analysis takes actual data on costs, sales and expenses and
creates a model that allocates the proportion of expenses that the margin must
cover. Once you do this analysis, you have the necessary information to
effectively set or adjust prices and create a useful markup formula for
pricing.
Function
o
It is frequently necessary to convert margin to
markup to establish a markup formula. To do this, subtract cost from the sale
price to obtain the margin. Then divide margin by cost (multiply by 100 to get
the markup percentage). For example, an item with a cost of $10 and a price of
$15 has a margin of $15 minus $10, or $5. Divide $5 by cost ($10) and multiply
by 100 to get the markup percentage of 50 percent. You don't really need to
convert markup to margin; just subtract cost from the price to get the margin.
Divide by the sale price and multiply by 100 to find the margin percentage.
Considerations
o
Determining the right markup to set the price of
a product is vital. You don't want to underprice or overprice products.
Tracking margin on a regular basis enables you to avoid both problems. Using
margin to analyze sales and expenses can also help you to identify products
that are not "pulling their weight." Another advantage is identifying
how much you can offer in coupons and sales to build customer base and sales volume
without discounting too deeply.
Read more: What Is the Difference Between Margin and Markup? | eHow.com http://www.ehow.com/about_4697388_difference-between-margin-markup_.html#ixzz2OJJGpHJ7
TURNOVER\
turnover
Definitions (3)Save to FavoritesSee Examples
1. Accounting:
(1) The annual
sales
volume net of all discounts and sales taxes.
(2) The number of times an asset (such as cash, inventory, raw materials) is replaced or revolves during an accounting period.
(2) The number of times an asset (such as cash, inventory, raw materials) is replaced or revolves during an accounting period.
2. Human
resource management: The number of employees
hired to replace those who left or were fired
during a 12 month
period.
Usage Examples
HIRE-PURCHASE SYSTEM (PART I)
 |
1.0 HIRE-PURCHASE SYSTEM ( PART I )
|
Chapter Outline
1.1 Introduction
1.2 Objectives
1.3 Meaning and concept of Hire-purchase System
1.4 Characteristics of Hire-purchase system
1.5 Difference between Hire-purchase system and Instalment payment system
1.6 Accounting entries in the books of Hire-purchaser
1.7 Accounting entries in the books of Hire vendor
1.8 Calculation of Cash Price, if Cash Price is not given
1.9 Calculation of Amount of Interest,if rate of Interest is not given
1.10 Let's Sum up
1.11 Home Assignments
1.12 Further Readings
1.13 Answer to SAQs
 |
Introduction
|
 |
Learning Objectives
|
|
After reading this chapter,
you are expected to learn about:
|
|
 |
1.3 Meaning and Concept of Hire-purchase system
|
Hire-puchase system is a special system of purchase and sale of goods. Under this system purchaser pays the price of the goods in instalments. The instalments may be annual, six monthly, quarterly, monthly fortnightly etc. Under this system the goods are delivered to the purchaser at the time of agreement before the payment of instalments but the title on the goods is transferred after the payment of all instalments as per the hire-purchase agreement. The special feature of a hire-purchase transaction is that the payment of every instalment is treated as the payment of hire charges by the purchaser to the hire vendor till the payment of the last instalment.. After the payment of the last instalment, the amount of various instalments paid is appropriated towards the payment of the price of the goods sold and the ownership or the goods is transferred to the purchaser. Thus hire-purchase means a transaction where the goods are sold by vendor to the purchaser under the following conditions :
- the goods will be delivered to the purchaser at the time of agreement.
- the purchaser has a right to use the goods delivered.
- the price of the goods will be paid in instalments.
- every instalment will be treated to be the hire charges of the goods which is being used by the purchaser.
- if all instalments are paid as per the terms of agreement , the title of the goods is transferred by vendor to the purchaser.
- if there is a default in the payment of any of the instalments, the vendor will take away the goods from the possession of the purchaser without refunding him any amount received earlier in the form of various instalments.
|
|
1.4 Characteristics of Hire-purchase system
|
Before discussing the characteristics of hire-purchase system, we must know what is a hire purchase agreement and what are the contents of a hire-purchase agreement. Hire-purchase agreement means a contract between the hire vendor and the hire purchaser regarding the sale of goods under certain conditions. Usually every hire-purchase agreement shall contain the following terms:
- the cash price of the goods, cash price means the price at which goods may be purchased against cash payment.
- the hire-purchase price, hire purchase price means the total amount which is payable by the hire-purchaser under the agreement.
- the date on which the hire-purchase agreement will commence.
- the description of the goods that will be delivered to the hire-purchaser at the commencement of the agreement.
- the number of instalments to be paid by the hire-purchaser along with the amount of each instalment and the date of payment of each instalment.
- the down payment if any, the down payment means the amount which is required to be paid by hire-purchaser to the hire vendor at the time of commencement of hire-purchase agreement.
- the rate interest charged by the hire vendor (optional).
The characteristics of hire-purchase system are as under
- Hire-purchase is a credit purchase.
- The price under hire-purchase system is paid in instalments.
- The goods are delivered in the possession of the purchaser at the time of commencement of the agreement.
- Hire vendor continues to be the owner of the goods till the payment of last instalment.
- The hire-purchaser has a right to use the goods as a bailer.
- The hire-purchaser has a right to terminate the agreement at any time in the capacity of a hirer.
- The hire-purchaser becomes the owner of the goods after the payment of all instalments as per the agreement.
- If there is a default in the payment of any instalment, the hire vendor will take away the goods from the possession of the purchaser without refunding him any amount.
 |
Self-Assessment Questions (SAQs) -1
|
|
(1) Define Hire-purchase system
in your own words. ( 100 words )
(2) State any FIVE
important elements of Hire-purchase agreement.
(a) The hire vendor has to refund the amount received after repossession of goods due to default in payment by hire-purchaser. (b) Under hire-purchase system the purchaser becomes the owner of the goods immediately after the down payment. (c)The last instalment under hire-purchase system comprises cash price only. (d) Under hire-purchase system the buyer does not charge the depreciation on the asset till he becomes the owner. (e) Interest is calculated on the hire purchase price at the given rate of interest. |
|
|
|
1.5 Difference between Hire-purchase system and Instalment
payment system
|
Instalment Payment System is system of purchase and sale of goods in which title of goods is immediately transferred to the purchaser at the time of sale of goods and the sale price of the goods is paid in instalments. In the event of default in payment of any instalment, the seller has no right to take back goods from the possession of the purchaser. He can file a suit for the recovery of the outstanding balance of the price of goods sold. The followings are the differences between Hire-purchase system and Instalment payment system:
- In Hire-purchase system, the transfer of ownership takes place after the payment of all instalments while in case of Instalment payment system, the ownership is transferred immediately at the time of agreement.
- In Hire-purchase system, the hire-purchase agreement is like a contract of hire though later on it may become a purchase after the payment of last instalment while in Instalment payment system, the agreement is like a contract of credit purchase.
- In case of default in payment , in Hire-purchase system the vendor has a right to back goods from the possession of the hire-purchaser while in case of Instalment payment system, the vendor has no right to take back the goods from the possession of the purchaser; he can simply sue for the balance due.
- In Hire-purchase system, if the purchaser sells the goods to a third party before the payment of last instalment, the third party does not get a better title on the goods purchased. But in case of Instalment payment system, the third party gets a better title on the goods purchased.
- In Hire-purchase system the provisions of the Hire-purchase Act apply to the transaction while in case of Instalment payment system, the provisions of Sale of Goods Act apply to the transaction.
|
|
1.6 Accounting In the books of Hire-purchaser
|
There are two methods of accounting in the books of Hire-purchaser. Their detailed description is as under:-
Asset Accrual Method:
Under this method it is considered that the hire-purchaser is the owner of the asset up to the value of the cash price paid by him in the from of down payment or the cash price paid included in various instalments. The following journal entries are recorded under this method.
(i)On taking the delivery of asset:
No entry is recorded.
(ii)On making the down payment (if any)Asset A/c Dr. (Amount of down payment)
To Cash/Bank A/c.(iii)On becoming the instalment due
Asset a/c. Dr (Balancing figure)
Intt. A/c. Dr. (Amt. of Intt.)
To Hire-Vendor A/c. (Amt. of Instalment)(iv)On payment of instalment:
Hire-Vendor A/c Dr. (Amt. of Instalment)
To Cash/Bank A/c.(v)On charging the Depreciation:
Depreciation A/c Dr. (Amt. of Depreciation)
To Asset A/c.
(vi)On Transfer of interest and depreciation to P/L A/c:P/L A/c. (Total amt.)
To Interest A/c (Bal. of Intt. A/c.)
To Depreciation A/c. (Bal. of Dep. A/c.)Under Total Assets Value Method:
Under this method of accounting in the books of hire-purchaser, is done on the assumption that the ownership of the asset is also transferred to the purchaser with the delivery of goods. The following journal entries are recorded under this method.
(i)On taking the delivery of assets at the time of agreement:
Asset A/c Dr. (Cash price of Asset)
To Hire vendor A/c.(ii)On making the down-payment (if any):
Hire-Vendor....... A/c. Dr. (Amount of down payment)
To Cash/Bank A/c(iii)On becoming the instalment due:
Interest A/c. Dr. (Amount of interest)
To Hire-Vendor A/c(iv)On payment of instalment:
Hire-Vendor a/c Dr. (Amount of instalment)
To Cash/Bank A/c(v)On charging the depreciations:
Depreciation A/c. Dr. (Amount of depreciation)
To Asset A/c.(vi)On Transfer of interest and depreciation to P/L A/c:
P/L A/c. Dr. (Total)
To Interest A/c. (Bal. of Intt. A/c.)
To Depreciation A/c. (Bal. of Dep. A/c.)
Posting in Ledger Accounts: After passing journal entries under any of the methods discussed above, the following ledger accounts are opened in the ledger and the postings are made accordingly.
(i) Asset A/c. (e.g. Trucks A/c, Machinery A/c. etc.)
(ii) Vendor's A/c.
(iii) Interest A/c.
(iv) Depreciation A/c.
Note: Before recording the entries the amounts of interest and depreciation will be calculated in two separate tables showing the calculations of interest and depreciation.
Calculation of Interest
The total payment made under hire-purchase system is more than cash price. In fact, this excess of payment over the cash price is interest. It is very essential to calculate interest because the amount paid for interest is charged to revenue and the asset is capitalized at cash price. Thus normally all instalments will include a part of cash price and a part of interest on the outstanding balance. However the amount paid at the time of agreement (down payment) will not include any interest. The calculation of interest is made under two conditions:
(a) When interest is included in amount of instalment: Where the hire-purchase price i.e. payment made in the form of down payment and all instalments is more than the cash price, it is regarded that the interest is included in instalments. It is explained in the following example.
Worked out Example-1 (Calculation of Interest)
On Ist April,2005 Mr. X purchased from M/s Y & Co. one 'Motor Truck' under hire-purchase system, Rs. 5,000 being paid on delivery and the balance in five annual instalments of Rs. 7,500 each payable on 31st March each year. The cash price of the motor truck is Rs. 37,500 and vendors charge interest at the rate of 5 per cent per annum on yearly balances. Find out the amounts of principal and interest included in each instalment.
(b) When interest is not included in instalments: Where the total amount paid in the form of down payment and all instalments is exactly equal to the cash price, it is regarded that the interest is not included in instalments. It means that interest is payable in addition to the agreed amount of instalment. It is explained in the following example.
Workedout Example-2 (Calculation of Interest): On April 1,2005, A Transport Company purchased a Motor Lorry from Motor Supply Co. Ltd. on hire-purchase basis, the cash price being Rs. 60,000. Rs. 15,000 on signing of the contract and balance in three annual instalments of Rs. 15,000 each on 31st March every year. In addition to it, interest at 5 per cent per annum was also payable to vendors on outstanding balances.
|
|
1.7 Accounting in the books of Hire-vendor
|
Hire Vendor: There is only one method of recording the entries in the books of hire-vendor. Irrespective of the fact whether the entries in the books of hire-purchaser are passed under the Asset Accrual Method or under the Total asset value Method.But the accounting entries in the books of hire-vendor are always passed under the total Asset Method. These entries are as under:-
(i)On delivery of goods to the hire-purchaser at the time of agreement:
Hire – purchaser A/c Dr. Cash Price
To Hire – Sales A/c.
(ii)On receipt of cash at the time of agreement (down payment), if any:Cash/Bank A/c. Dr. (Amt. of down payment)
To Hire-Purchaser(iii)On interest being due:
Hire – Purchaser A/c Dr. Amt. of Interest
To Interest A/c.(iv)On receipt of instalment:
Cash/bank A/c. (Amt. of Instalment)
To Hire – Purchaser(v)On Transfer of Balance of Hire-Sales A/c. to Trading A/c. (at the end of first year only):
Hire – Sales A/c Dr. Cash Price
To Trading A/c.
(vi)On Transfer of amount of interest to P/L A/c:Interest A/c. Dr. (Balance of Intt. A/c.)
To P/L A/c.Note: In solving a numerical problem, before recording the entries, the amount of interest included in various instalments will be separately calculated as already explained.
Posting in Ledger Accounts:
After passing entries in the journall of hire – vendor the following accounts will be opened in the ledger of hire – vendor and the postings will be made accordingly.
- (i) Hire – Purchaser A/c.
- (ii) Hire – Sales A/c. (only in first year)
- (iii) Interest A/c.
Calculate the amount of annual instalment, and show the Journal entries and necessary ledger accounts in the books of Moti Ltd. for three years. The present value of Annuity of Rupees one for three years at 5% is 2.72325.
Worked out examples-3:
On 1st April,2005 X Company Ltd. purchased a machine from Y Machines Ltd. on hire-purchase basis, the cash price being Rs. 55,850 Rs. 15,000 was paid on the signing of the contract and the balance in three annual instalments of Rs. 15,000 each on 31st March each year. Interest is charged at 5% per annum. Depreciation was written off at rate of 10% per annum on the diminishing balance system.
Give journal entries in the books of X Company Ltd. whose accounting year ends on 31st March each year, under Asset Accrual Method.
Solution:
(a) under Asset Accrual Method
|
Journal Entries
in the Books of X Co. Ltd.
|
||||
|
Date
|
Particulars
|
LF
|
Dr.(Rs.)
|
Cr.(Rs.)
|
|
2005
April 1 |
Machinery A/c …………….Dr.
To Bank A/c(Being down payment made at the time of delivery) |
15,000
|
15,000 |
|
|
2006
March 31 |
Machinery A/c ……………………………………...Dr.
Interest A/c ....................Dr.To Y Machine Ltd. (Being the first instalment due). |
12,957
2,043 |
15,000 |
|
|
"
|
Y MachinesLtd. …………………Dr.
To Bank(Being the amount paid in first instalment) |
15,000
|
15,000 |
|
|
"
|
Depreciation A/c …………………Dr.
To Machinery A/c(Being the depreciation charged) |
5,585
|
5,585 |
|
|
"
|
Profit & Loss A/c …………………Dr.
To Interest A/cToDepreciation A/c (Being the amount transferred) |
7,628
|
2,043 |
|
|
2007
March 31 |
Machinery A/c ……………………………………...Dr.
Interest A/c ....................Dr.To Y Machine Ltd. (Being the second instalment due). |
13,605
1,395 |
15,000 |
|
|
"
|
Y Machines Ltd. …………………Dr.
To Bank(Being the amount paid in second instalment) |
15,000
|
15,000 |
|
|
"
|
Depreciation A/c …………………Dr.
To Machinery A/c(Being the depreciation charged) |
5,027
|
5,027 |
|
|
"
|
Profit & Loss A/c …………………Dr.
To Interest A/cToDepreciation A/c (Being the amount transferred) |
6,422
|
1,395 |
|
|
2008
March 31 |
Machinery A/c ……………………………………...Dr.
Interest A/c ....................Dr.To Y Machine Ltd. (Being the third instalment due). |
14,288
712 |
15,000 |
|
|
"
|
Y Machines Ltd. …………………Dr.
To Bank(Being the amount paid in third instalment) |
15,000
|
15,000 |
|
|
"
|
Depreciation A/c …………………Dr.
To Machinery A/c(Being the depreciation charged) |
4,524
|
4,524 |
|
|
"
|
Profit & Loss A/c …………………Dr.
To Interest A/cTo Depreciation A/c (Being the amount transferred) |
5,236
|
712 |
|
Note1:Interest has been calculated in the manner already explained in workedout example-1.
|
|
1.8 Calculation of Cash Price, if Cash Price is not given
|
Some times in a problem of hire-purchase, cash price of goods sold is not given. Only hire-purchase price is given under such situation first of all, cash price is to be calculated in order to find out the amount of interest included in each instalment. the cash price can be calculated under following two situations.
(a)By Annuity Method, if the annity value of Re. 1 is given:
Cash Price = (Annuity, Value of Re.1 x Amt. of one instalment) + down payment if, any.
Calculation of Cash Price by Annuity Method
Worked out Example-4
On 1st April,2005 a manufacturing company buys on Hire-purchase system a machinery for Rs. 60,000, payable by three equal annual instalments combining principal and interest, the rate of interest was 5% per annum. Calculate the amount of cash price and interest. The present value of an annuity of one rupee for three years at 5% interest is Rs. 2,72325.
Solution:
Calculation of Cash Price – The present value of an annuity of Re. 1 paid for 3 year @ 5% = Rs. 2,72325 Then the present value of Rs. 20,000 for 3 years = 2,72325 x 20,000 = Rs. 54,465 Cash Price Rs. 54,465
(b) By Arithmetic Method, if the annuity value of Re. 1 is not given:
? First take the last instalment and calculate interest included in that instalment. Interest: = (Amount of instalment x Rate of Int) / 100+Rate of Int.
Thereafter interest included in last but one instalment should be calculated. Interest = [(Amt. of last but one instalment + principal price included in the last instalment) x Rate of Interest] / 100+ Rate of Int.
- ? Interest included in all proceeding instalment should be calculated in the same manner.
- ? In the end, interest included in each instalment should be added. It should be remembered that down payment does not include any interest.
- ? Finally cash price = Hire purchse price – Total interest included in various instalments.
Worked out Example-5
Mr. X purchased a machine on Hire-Purchase system on 1st April,2005. He paid Rs. 5,000 at spot and then three annual instalments of Rs. 5,000 each. The rate of interest was 5% per annum. Find out the amount of interest included in instalments and cash price of the machine.
Solution:
(1)First of all Interest included in the 3rd instalment is to be calculated.
Interest=(5000x5)/105=Rs. 238,Principal= 5000-238=4762
(2)Interest included in second instalment = [(5000+4762)x5]/105 = 465, Principal=4535
(3)Interest included in 1st instalment = [(5000+4762+4535)x5]/105 = 681,Principal=4319
Cash Price = 4762+4535+4319+down payment Rs.5000 = Rs.=18616
Total Interest=Rs20000-18616=1384. I Yr. rs.681, IIYr. Rs465, III Yr.Rs238
Note: Now you can make the interest table in the usual manner as explained in worked out example-1 and check your calculation of amount of interest.
|
|
1.9 Calculation of Amount of Interest, if Rate of Interest is
not given
|
Wherever, rate of interest is not given in the problem, again there can be two situations.
(a) When cash price and the amounts of instalments are given and the amount of each instalment is same. the following worked out example will make the calculation clear.
Worked out Example-6
(Calculation of Interest When Rate of Interest is not given) A machine was sold on hire-purchase system on 1st April,2005 Rs. 10,000 was paid at spot and rest was paid by four equal quarterly instalments of 22,000 each. The cash price of machine was Rs. 90,000. Find out the amount of interest included in each instalment.
Soluton:
Hire-purchase Price = 10,000 + (22,000 x 4) = Rs.98,000 Less: Cash Price Rs.90,000 Total Interest= Rs.8,000
The total Interest of Rs 8,000 is to be apportioned among the various instalments i.e. 4th, 3rd, 2nd and 1st instalment in the ratio of 1:2:3:4 (i.e. among 1st, 2nd, 3rd and 4th instalment in the ratio of 4:3:2:1)
(1)Share of 1st instalment in the Interest= 8,000x4/10 = Rs.3,200
(2)Share of 2nd instalment in the Interest= 8,000x3/10 = Rs.2,400
(3)Share of 3rd instalment in the interest= 8,000x2/10 = Rs.1,600
(4)Share of 2nd instalment in the interest= 8,000x1/10 = Rs. 800
(b) When cash price and amounts of instalments are given but the amount of each instalment is not equal: The following worked out example will clear the doubts.
Rate of Interest not known and Instalments of different amounts
Worked out Example-7
Cash price of a machine is Rs. 37,400 on 1st January,2003. Its hire-purchase price is Rs. 50,000. This hire-purchase price is paid in five annual instalments in the following manner: Rs. 15,000 at the end of the first year Rs. 12,000 at the end of second year; Rs. 10,000 at the end of third year, Rs. 8,000 at the end of fourth year, Rs. 5,000 at the end of fifth year. Calculate interest and cash price included in each instalment.
Solution:
Calculation of Interest Included in each Instalment
Total Interest= Hire-purchase price-Cash Price
Total Interest=Rs.50,000-37,400=12600
Total Interest of Rs12,600 is to be apportioned among the five instalments in the following manner:
|
Instalment No
|
Unpaid
Amount(Rs.)
|
Calculation of
Int.(Rs.)
|
|
First
|
50000
|
(12600x50000)/126000=5000
|
|
Second
|
50000-15000=35000
|
(12600x35000)/126000=3500
|
|
Third
|
35000-12000=23000
|
(12600x23000)/126000=2300
|
|
Fourth
|
23000-10000=13000
|
(12600x13000)/126000=1300
|
|
Fifth
|
13000-8000=5000
|
(12600x5000)/126000=500
|
|
Total
|
126000
|
|
Instalment No.
|
Instalment(Rs.)
|
Interest(Rs.)
|
Cash Price(Rs.)
|
|
First
|
15000
|
5000
|
10000
|
|
Second
|
12000
|
3500
|
8500
|
|
Third
|
10000
|
2300
|
7700
|
|
Fourth
|
8000
|
1300
|
6700
|
|
Fifth
|
5000
|
500
|
4500
|
|
Total
|
50000
|
12600
|
37400
|
 |
Let's Sum Up
|
 |
Glossary
|
 |
Practice Test
|
1.11 Home Assignments:
Exercise-1:
AB Transport Company purchased a Truck from XY Automobiles Ltd. on Ist January,2001 on hire-purchase system. The cash price of the truck was Rs. 3,20,000 which was payable as under:
On 01-01-2001 Rs.1,00,000
On 31-12-2001 RS.80,000
On 31-12-2002 RS.80,000
On 31-12-2003 RS.82,478
XY Automobiles Ltd. charged interest @ 5% per annum on the unpaid amount. The purchasing company decided to write off depreciation @ 20% of the cost price each year. You are required to give the necessary journal entries in the books of both the parties for three years. Also show the calculation of interest, depreciation and the instalment.
Exercise-2 On Ist April,2001 Modern Traders Ltd. took delivery of one Truck from GE Motors Ltd. on Hire-Purchase Agreement, payable in three equal instalments of Rs. 60,000 each on 31st March,2002, 2003, 2004. The cash value of the Truck on delivery was Rs. 1,63,400. Vendor charges interest at 5 per cent per annum on the yearly balances. The purchaser wrote off depreciation @ 25 per cent on the diminishing value method for each year. Pass the necessary Journal entries to record the above transactions in the books of both the parties.
Exercise-3 A machinery is taken under the Hire-Purchase System for Rs. 2,500 to be paid as follows:
On delivery Rs. 400; at the end of first year Rs. 600; at the end of second year Rs.400; at the end of third year Rs. 1,100. Interest included in Rs. 2,500 being charged on the cash value at 10% per annum. Pass Journal entries in the books of hire-purchaser writing off depreciation @ 5% per annum on Diminishing Balance Method. Also give necessary accounts in the ledger of hire-purchaser.
Exercise-4 On Ist January,2001 Moti Ltd. purchased on Hire-Purchase System from Hire-Vendor some machinery for Rs. 25,500 payable in three equal instalments combining principal and interest, the latter being a normal rate of 5% per annum.
Calculate the amount of annual instalment, and show the Journal entries and necessary ledger accounts in the books of Moti Ltd. for three years. The present value of Annuity of Rupees one for three years at 5% interest is 2.72325.
|
|
(i) Chapter on Hire-puchase System in the Text Book “Advanced Accountancy” Volume I by R. L. Gupta and M Radhaswamy published by Sultan Chand & Co. New Delhi ( ISBN 81-8054-110-X )
(ii) Chapter on Hire-purchase System in the Text Book “Advanced Accountancy” by S. N. Maheshwari and S. K. Maheshari published by Vikas Publishing House New Delhi
Please help me with hire purchase maths problem?
i have this question which i have
been looking over and over again but i cant solve it
the question is:
A bicycle has a marked price of $300. It can be bought through hire-purchase with a deposit of $60 and 10% interest on the outstanding balance, to be paid in 10 monthly installments
calculate
a) the amount of each monthy instalment
b) the total cost of buying the bicycle by hire purchase
the question is:
A bicycle has a marked price of $300. It can be bought through hire-purchase with a deposit of $60 and 10% interest on the outstanding balance, to be paid in 10 monthly installments
calculate
a) the amount of each monthy instalment
b) the total cost of buying the bicycle by hire purchase
- 3 years ago
- Report Abuse
Best
Answer - Chosen by Asker
Total price = $300.
Deposit $60.
So; $300 - $60 = $240 left to pay.
10% interest on $240 = 0.1 * $240 = $24. So that's $24 interest.
Now; $240 + $24 = $264 to pay over 10 months.
(a) Monthly Instalments is $26.40 per month.
(b) Total cost of the bicycle is $300 +
Deposit $60.
So; $300 - $60 = $240 left to pay.
10% interest on $240 = 0.1 * $240 = $24. So that's $24 interest.
Now; $240 + $24 = $264 to pay over 10 months.
(a) Monthly Instalments is $26.40 per month.
(b) Total cost of the bicycle is $300 +
A sequence is an ordered list of numbers. The sum of the terms of a sequence is called a series.
While
some sequences are simply random values,
other sequences have a definite pattern that is used to arrive at the sequence's terms. Two such sequences are the arithmetic and geometric sequences. Let's investigate the geometric sequence.
Examples:
Formulas used with geometric sequences and geometric
series:
Examples:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||
ARITHMETIC
PROGRESSSION
 |
 |
 |
powered by FreeFind |
Arithmetic and
Geometric Sequences (page 3 of 5)
Sections: Terminology and notation,
Basic examples,
Arithmetic and geometric sequences, Arithmetic series, Finite and infinite
geometric series
The two simplest sequences to work
with are arithmetic and geometric sequences. An arithmetic sequence goes from
one term to the next by always adding (or subtracting) the same value. For
instance, 2, 5, 8, 11, 14,... and 7, 3,
–1, –5,... are arithmetic, since you add 3 and subtract 4, respectively, at each step. A
geometric sequence goes from one term to the next by always multiplying (or
dividing) by the same value. So 1,
2, 4, 8, 16,... and 81, 27, 9, 3, 1, 1/3,...
are geometric, since you multiply by 2 and divide by 3, respectively, at each step.
The number added (or subtracted)
at each stage of an arithmetic sequence is called the "common
difference" d, because if you subtract (find the difference of)
successive terms, you'll always get this common value. The number multiplied
(or divided) at each stage of a geometric sequence is called the "common
ratio" r, because if you divide (find the ratio of) successive
terms, you'll always get this common value.
Copyright © Elizabeth
Stapel 2006-2011 All Rights Reserved
3, 11, 19, 27, 35,...
To
find the common difference, I have to subtract a pair of terms. It doesn't
matter which pair I pick, as long as they're right next to each other:
11
– 3 = 8
19 – 11 = 8 27 – 19 = 8 35 – 27 = 8
The
difference is always 8,
so d = 8.
Then the next term is 35 + 8 = 43.
2/9, 2/3, 2, 6, 18,...
To
find the common ratio, I have to divide a pair of terms. It doesn't matter
which pair I pick, as long as they're right next to each other:
The
ratio is always 3,
so r = 3.
Then the sixth term is (18)(3) = 54 and the seventh term is (54)(3)
= 162.
Since arithmetic and geometric
sequences are so nice and regular, they have formulas.
For arithmetic sequences, the
common difference is d, and the first term a1 is often
referred to simply as "a". Since you get the next term by adding the common difference,
the value of a2 is just a + d. The third term is a3 = (a
+ d) + d = a + 2d.
The fourth term is a4 = (a
+ 2d) + d = a + 3d.
Following this pattern, the n-th term an will have the form an = a + (n – 1)d.
For geometric sequences, the
common ratio is r, and the first term a1 is
often referred to simply as "a". Since you get the next term by multiplying by the common
ratio, the value of a2 is just
ar. The third term is a3 = r(ar)
= ar2. The fourth term is a4 = r(ar2) = ar3. Following this pattern, the n-th term an will
have the form an = ar(n – 1).
1/2, 1, 2, 4, 8,...
The
differences don't match: 2 – 1 =
1, but 4 – 2 = 2.
So this isn't an arithmetic sequence. On the other hand, the ratios are the
same: 2 ÷ 1 = 2, 4 ÷ 2 = 2, 8 ÷ 4 = 2. So this is a geometric sequence with common ratio r = 2 and a = 1/2. To find the
tenth and n-th terms, I can just plug into the formula an
= ar(n – 1):
an = (1/2) 2n–1
a10 = (1/2) 210–1 = (1/2) 29 = (1/2)(512) = 256
The
n-th term of an arithmetic sequence is of the form an
= a + (n – 1)d.
In this case, that formula gives me a6 = a
+ (6 – 1)(3/2) = 5. Solving this formula for the
value of the first term of the sequence, I get a = –5/2. Then:
a1 = –5/2, a2 = –5/2 + 3/2 = –1, a3
= –1 + 3/2 = 1/2,
and an = –5/2 + (n – 1)(3/2)
Since
a4 and a8 are four places apart, then I know from the
definition of an arithmetic sequence that a8 = a4 +
4d. Using this, I can then solve for
the common difference d:
65
= 93 + 4d
–28 = 4d –7 = d
Also,
I know that a4 = a
+ (4 – 1)d, so, using the value I just found
for d, I can find the value of the first term a:
93
= a + 3(–7)
93 + 21 = a 114 = a
Once
I have the value of the first term and the value of the common difference, I
can plug-n-chug to find the values of the first three terms and the general
form of the n-th term:
a1 = 114, a2 = 114 – 7 = 107, a3
= 107 – 7 = 100
an = 114 + (n – 1)(–7)
These
two terms are 12 – 5 = 7 places apart, so, from the definition of a geometric
sequence, I know that a12 = ( a5
)( r7 ).
I can use this to solve for the value of the common ratio r:
160
= (5/4)(r7)
128 = r7 2 = r
Since
a5 = ar4, then I can solve for the value of the first term a:
5/4
= a(24) = 16a
5/64 = a
Once
I have the value of the first term and the value of the common ratio, I can
plug each into the formulas, and find my answers:
an = (5/64)2(n – 1)
a26 = (5/64)(225) = 2 621 440
|
|
 |
|
Copyright © 2006-2012
Elizabeth Stapel
| About
| Terms
of Use
|
|
|
|
|
|
|
Comments