What Is Accounting For Installment System?

Accounting for installment system

Concept

An installmentsystem is a credit organisation of purchase as well as sale of goods inwards which payments or receipts are made inwards installment terra firma over a stream of time. In this system, surely sum is paid equally downward payment sum at the fourth dimension of signing the agreement. The remaining sum tin give the axe locomote paid inwards unlike periodical installments such equally monthly, their monthly, one-half yearly or annually over a stream of time. In this system, the purchase gets both possession also equally ownership rights of the goods at the fourth dimension of signing the contact. If to purchaser fails to pay whatsoever installment, the vendor cannot reposes the goods as well as the sum already paid inwards installment past times the purchases are non forfeiture. In this case, the vendor tin give the axe sue the purchaser for recovery of remainder amount.

Feature of installment system

The next are the primary features of installment system:

• It is a organisation of credit purchase as well as sale of assets or goods on credit.
• The purchaser should pay downward payment at the fourth dimension of signing the agreement.
• The ownership of goods or assets is instantly transferred to buyer seller at the fourth dimension of agreement.
• The purchaser receives the rights to role of assets instantly afterwards the signing of agreement.
• The buyer makes payments inwards unlike installments over a stream of fourth dimension equally per agreement.
• The seller cannot serenity the goods, if the buyer fails to pay installment.
• In illustration of default of whatsoever installment, the full sum of installment already paid past times the buyer cannot locomote forfeited past times the seller.
• Legal procedures should locomote followed past times the seller to collect the sum of remaining installments inwards the illustration of defaulting the installments.
• Risks over the assets are automatically transferred to the buyer merely afterwards agreement.
• The purchase cannot provide the assets to the seller afterwards signing the understanding nether this system.

Difference betwixt hire Purchase andInstallment System

The departure betwixt hire purchase as well as installment organisation are explained inwards the next points:

Calculation of interest, cash toll as well as installment using analytical Table

Accounting Treatment inwards the Books of Vendorand Buyer for installment

After calculating interest, cash price, as well as installment equally per hire purchase system, the next magazine entries are made inwards the books of purchaser:

After passing the higher upwardly mentioned magazine entries inwards the books of purchase, the next necessary ledger work concern human relationship tin give the axe locomote prepared:

·         Assets account

·         Interest suspense account

·         Vender account

·         Interest account

·         Depreciation account

The next magazine entries are made inwards the books of vendor inwards the illustration of installment system:

After passing thee higher upwardly mentioned magazine entries inwards the books of vender, the next necessary ledger accounts tin give the axe locomote prepared:

• Purchase account
• Sales account
• Interest suspense account
• Interest account
• Depreciation account

Review of Theoretical Concept

Write the pregnant of installment payment system.

 An installment organisation is a credit organisation of purchase as well as sale of goods inwards which payments or receipts are made inwards installment terra firma over a stream of fourth dimension inwards this system, surely sum is paid equally downward payment sum at the fourth dimension of signing the agreement. The remaining sum tin give the axe locomote paid inwards unlike periodical installments such equally monthly, iii monthly, quarterly, one-half yearly or annually over a stream of time, inwards this organisation or annually over a stream of time, the purchase gets both possession also equally ownership rights of the goods at the fourth dimension of signing the contact if the purchaser fails to pay whatsoever installment, the vendor cannot reposes the goods as well as the sum already paid inwards installment past times the purchaser are non forfeiture, inwards this case, the vendor tin give the axe sue the purchaser for recovery of remainder amount.

Explain whatsoever v characteristic of installment payment system.

The next are the primary v features of installment system:

• It is a organisation of credit purchase as well as sale of assets or goods on credit.
• The purchaser should pay downward payment at the fourth dimension of signing the agreement.
• The ownership of goods or assets is instantly transferred to buyer seller at the fourth dimension of agreement.
• The purchaser receives the rights to role of assets instantly afterwards the signing of agreement.
• The buyer makes payments inwards unlike installments over a stream of fourth dimension equally per agreement.

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