Accounting · Hire Purchase Accounting
Consider the following statements regarding the accounting methods used in the hire purchase system: Statement 1: Under the Asset Accrual Method, the asset account is debited annually with the total amount of the instalment paid, which includes both the principal and interest components. Statement 2: In the Total Asset Value Method, the asset account is debited with the full cash price of the asset at the time of the initial transaction. Which of the statements given above is/are correct?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Both statements are false.
- 2Statement 1 is true, but Statement 2 is false.
- 3Statement 1 is false, but Statement 2 is true.✓
- 4Both statements are true.
Correct answer
Statement 1 is false, but Statement 2 is true.
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