In the Books of Hire Vendor (Finance Company) Homework Help

In the Books of Hire Vendor (Finance Company)

At the inception of the transactions, the finance company should record the hire purchase installments receivables as a current asset (i.e., stock on hire) arid the (unearned) finance income component of these installments as a current liability, under the head unmatched finance charges. At the end of each accounting period, an appropriate part of the matured finance income should be recognized as current income for the period would be allocated over the relevant accounting periods on the basis of any of the following methods, namely, (i) ERI, (ii) SOYD and (iii) SLM. At the end of each accounting period, the hire purchase price less the installments received should be shown as a receivable stock hire and the finance income component of these installments should be shown as a current Liability unmatched finance charge. The direct costs associated with structuring the transaction deal should be either expended immediately or allocated against the finance income over the hire period.

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