WorksheetsHire Purchase System - MCQs
Total questions: 25
Worksheet time: 13mins
What is a hire purchase system?
A system for cash sales
A credit sale system
A leasing system
A donation system
In a hire purchase, ownership is transferred to the buyer:
At the time of agreement
On payment of first installment
On payment of the last installment
Never
Which of the following is NOT a feature of hire purchase?
Ownership transfers immediately
Payment in installments
Down payment is required
Interest is charged
Who bears the risk of loss in a hire purchase until ownership is transferred?
Buyer
Seller
Government
Insurance company
Hire purchase is governed under:
Sale of Goods Act
Hire Purchase Act
Companies Act
Banking Regulation Act
What is included in the hire purchase price?
Only the cost price
Only the interest
Down payment only
Cost price + Interest
Down payment in a hire purchase system is:
Final installment
First installment
Security deposit
Refundable fee
Which account is debited when an asset is purchased on hire purchase?
Hire vendor A/c
Asset A/c
Interest A/c
Purchase A/c
What is the nature of interest paid under hire purchase?
Revenue expense
Capital expense
Deferred revenue expense
Asset
If the buyer defaults, the seller has the right to:
Sue for damages only
Do nothing
Repossess the goods
Ignore the contract
In hire purchase, the installment includes:
Only principal
Only interest
Principal and interest
Commission
The person who gives goods on hire purchase is called:
Debtor
Vendor
Hirer
Borrower
On default, if goods are repossessed, the asset is:
Debited
Credited
Transferred to suspense A/c
Ignored
Which of the following best describes repossession?
Sale of goods
Recovery of interest
Taking back goods by seller
Providing discount
Hire purchase is a type of:
Loan
Trade discount
Deferred payment system
Cash transaction
Interest in hire purchase is calculated on:
Outstanding cash price
Total price
Down payment
Whole installment
The legal ownership of the asset lies with:
Hirer
Vendor
Government
Bank
Installments are treated as:
Liability
Asset
Expense
Revenue
The accounting method for hire purchase includes:
Cash system
Accrual system
Asset accrual method
Any of the above
Interest outstanding is shown in the books as:
Asset
Liability
Income
Expense
When an asset is repossessed, the vendor may:
Cancel the agreement
Retain all money paid
Sell the asset
All of the above
Profit on hire purchase is recognized when:
Agreement is signed
Down payment is received
Installments are received
Ownership is transferred
In hire purchase, the buyer is called:
Vendor
Lessee
Hirer
Debtor
Hire purchase is different from lease because:
Ownership never transfers in lease
No installments in lease
Interest is not charged in lease
Lease has no agreement
If the asset is returned, the buyer must:
Pay full hire price
Pay for usage only
Pay for damages
Pay nothing
