Lesson Notes By Weeks and Term - Senior Secondary 3
Hire purchase and installment account II
Hire purchase and installment account II
Term: 1st Term
Week: 4
Class: Senior Secondary School 3
Age: 17 years
Duration: 40 minutes of 2 periods each
Date:
Subject: Financial accounting
Topic:- Hire purchase and installment account II
SPECIFIC OBJECTIVES: At the end of the lesson, pupils should be able to
INSTRUCTIONAL TECHNIQUES: Identification, explanation, questions and answers, demonstration, videos from source
INSTRUCTIONAL MATERIALS: Videos, loud speaker, textbook, pictures
INSTRUCTIONAL PROCEDURES
PERIOD 1-2
|
PRESENTATION |
TEACHER’S ACTIVITY |
STUDENT’S ACTIVITY |
|
STEP 1 INTRODUCTION |
The teacher reviews the previous lesson on hire purchase and installment account |
Students pay attention |
|
STEP 2 EXPLANATION |
She describes the layout/format of the hire purchase account |
Students pay attention and participates |
|
STEP 3 DEMONSTRATION |
She solves some exercises on hire purchase |
Students pay attention and participate
|
|
STEP 4 NOTE TAKING |
The teacher writes a summarized note on the board |
The students copy the note in their books |
NOTE
HIRE PURCHASE
FORMAT
DR. Interest account CR
EXAMPLES
Mallam Tanko purchased a trailer lorry on 1st January 2010 from Ikehchukwu Okeke on hire purchase terms, under which Mallam Tanko paid a deposit of N123,010 to be followed by four annual installments of N100,000 each payable on 31st December. Interest is charged on outstanding balance at 10% per annum. The cash price of the equipment is N440, 000.
Depreciation on the equipment is at 20% per annum on straight line basis. All the sums due were paid on due dates.
Show the relevant ledger entries in the books of Mallam Tanko.
Workings (i)
Calculation of Hire purchase interest
H P interest
|
|
N |
N |
|
|
1/1/2010 |
Cash price |
440,000 |
|
|
1/1/2010 |
Deposit |
(123,010) |
|
|
|
|
316,990 |
|
|
31/12/2010 |
Interest (N316, 990 x 10%) |
31,700 |
31,700 |
|
|
|
348,690 |
|
|
31/12/2010 |
1st installment |
(100,000) |
|
|
|
|
248,690 |
|
|
31/12/2001 |
Interest (N248, 690 x 10%) |
24, 870 |
24, 870 |
|
|
|
273, 560 |
|
|
31/12/2001 |
2nd Installment |
(100, 000) |
|
|
|
|
173, 560 |
|
|
31/12/2002 |
Interest (N173, 560 x 10%) |
17, 356 |
17, 356 |
|
|
|
190, 916 |
|
|
31/12/2002 |
3rd Installment |
(100, 000) |
|
|
|
|
90, 916 |
|
|
31/12/2003 |
Interest (N90, 916 x 10%) |
9,084* |
9, 084 |
|
31/12/2003 |
4th Installment |
100, 000 (N100, 000)83, 010 |
|
* The figure is as a result of previous approximation.
|
Working 2. |
Calculation of Hire purchase price |
|
|
Initial deposit paid on 1/1/2000 |
N 123, 010 |
|
|
Installments (N100, 000 x 4) |
400, 000 |
|
|
|
523, 000 |
|
|
Ledger accounts |
|
|
Hire purchase Creditor ( MallamTanko)
|
N
1/1/2000 Bank (Deposit) 123, 010
31/12/2000 Bank (1st Installment) 100, 000
31/12/2000 Balance c/d 248, 690 |
N
1/1/2000 Hire purchase Lorry 440, 000
31/12/2000 H P Interest 31, 700 |
|
471, 700
31/12/2001 Bank (2nd Installment) 100, 000
31/12/2001 Balance c/d 173, 560
273, 560
31/12/2002 Bank (3rd Installment) 100, 000
31/12/2002 Balance c/d 90, 916
190, 916
31/12/2003 Bank (4th Installment) 100, 000
100, 000 |
471, 700
1/1/2001 Balance b/d 248,690
31/12/ H P Interest 24, 870
273, 560
1/1/2002 Balance b/d 173, 560
31/12/2002 H P Interest 17, 356
190, 916
1/1/2003 Balance b/d 90, 916
31/12/2003 H P Interest 9, 084
100, 000 |
Hire purchase Interest Account
|
N
31/12/2000 H P Creditor 31, 700
31/12/2001 H P Creditor 24, 870
31/12/2002 H P Creditor 17, 356
31/12/2003 H P Creditor 9, 084 |
N
31/12/2000 Profit & Loss a/c 31, 700 31/12/2001 Profit & Loss a/c 24, 870 31/12/2002 Profit & Loss a/c 17, 356 31/12/2003 Profit & Loss a/c 9, 084 |
Hire purchase Lorry account
|
N
1/1/2000 H P Creditor 440, 000
1/1/2001 Balance b/d 440, 000
1/1/2002 Balance b/d 440, 000 |
N
1/1/2000 Balance b/d 440, 000
1/1/2001 Balance b/d 440, 000
1/1/2002 Balance b/d 440, 000 |
|
1/1/2003 Balance b/d 440, 000
1/1/2004 Balance b/d 400, 000 |
1/1/2003 Balance b/d 440, 000 |
|
|
|
Provision for Depreciation account
|
N
31/12/2000 Balance c/d 88, 000
31/12/2001 Balance c/d 176, 000
176, 000
31/12/2002 Balance c/d 264,000
264, 000
31/12/2003 Balance b/d 352, 000
352, 000 |
N
31/12/2000 P & L a/c 88, 000
1/1/2001 Balance b/d 88, 000
31/12/2001 P & L a/c 88,000
176, 000
1/1/2002 Balance b/d 176, 000
31/12/2002 P & L 88, 000
264, 000
1/1/2003 Balance b/d 264, 000
31/12/2003 P & L 88, 000
352, 000
1/1/2004 Balance b/d 352, 000 |
This is the second method of treating hire purchase transactions. When this method is employed, these are the accounting entries:
DR. Asset account (with the Cash price)
DR. Hire purchase interest suspense (with the full H P Price)
CR. Creditors account (with the H P price)
b. Payment of initial deposit
DR. Creditors account
CR. Bank account
c. Payment of installments
DR. Creditors account
CR. Bank account
DR. Interest account
CR. Hire purchase interest suspense account
DR. Profit and loss account
CR. Hire purchase interest account
DR. Profit and Loss account
CR. Provision for depreciation account
EVALUATION:
Using example 1 above, prepare
CLASSWORK: As in evaluation
CONCLUSION: The teacher commends the students positively