Home appliances Ltd. Sells goods on hire purchase terms at a profit of 25% on hire purchase price. Following are the transactions for the year ended December 31, 2018.
| Rs. | ||
| January | Stock out on hire at cost. | 6,000 |
| Stock on hand (at shop) | 1,000 | |
| Installment due | 600 | |
| Cash Received | 16,000 | |
| December 31 | Stock out on hire (at cost) | 6,900 |
| Stock on hand (at shop) | 1,400 | |
| Installment due | 1,000 |
Calculate the profit or loss on hire purchase under Debtors Method.
To calculate the profit or loss on hire purchase under the Debtors Method, we need to consider the transactions throughout the year and use the following formula:
Profit or Loss = (Total Cash Received + Total Installment Due) - Total Stock Out on Hire - Total Stock on Hand
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