Hire-Purchase & Lease

How do I record a hire-purchase transaction?


What is the difference between hire-purchase and leasing?



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I have to say I had never heard of the term hire-purchase ... so I went looking.

At tutor2u.net, a UK based website, it explains the difference between the two. You can find the "lesson" at tutor2u.net/business/finance/finance_sources_assets_leasingintro.asp .

After reading their article, it sounds like hire-purchase financing is what I call a capital lease ... and (asset) leasing is what I refer to as an operating lease.

You will find my information on Capital Lease vs Operating Lease under The Practice button.

My information is based on Canadian accounting practices with comments on US practices.

The bookkeeping entries for a capital lease may not be appropriate for UK accounting practices as they are based on Canadian GAAP guidelines.

So I went looking again and found a good article written by UK CA Peter Taylor on the accounting and tax treatment of both. It is titled Accounting For Loans, Hire Purchase and Leasing.

You can find the article at howto.co.uk/business/bookkeeping-small-business/accounting_for_loans_hire_purchase_and_leasing/

Thanks so much for the question. I learned something new today ... which is always good! :0)

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