Class 12 Finance Chapter 15 Hire-Purchase

Class 12 Finance Chapter 15 Hire-Purchase Solutions English Medium As Per AHSEC New Syllabus to each chapter is provided in the list so that you can easily browse through different chapters ASSEB Class 12 Finance Chapter 15 Hire-Purchase Solutions in English and select need one. AHSEC Class 12 Finance Chapter 15 Hire-Purchase Solutions Download PDF. HS 2nd Year Finance Textual Solutions.

Class 12 Finance Chapter 15 Hire-Purchase

Also, you can read the NCERT book online in these sections Solutions by Expert Teachers as per Central Board of Secondary Education (CBSE) Book guidelines. ASSEB Class 12 Banking Question Answer are part of All Subject Solutions. Here we have given HS 2nd Year Finance Textual Solutions English Medium for All Chapters, You can practice these here.

Hire-Purchase

Chapter: 15

Unit – 4: Financial Services

A. Very Short Answer Questions: 

1. What is Down Payment?

Ans: Down payment is the initial amount paid by the buyer at the time of purchasing goods under the hire-purchase system.

2. What type of goods are sold under the Hire-Purchase System?

Ans: Generally, durable consumer goods and capital goods are sold under the hire-purchase system.

B. Short Answer Questions: 

1. What is hire-purchase?

Ans: Hire-purchase is a system in which goods are purchased by paying an initial amount and the balance in instalments. Ownership is transferred to the buyer only after the last instalment is paid.

2. State two features of hire-purchase system.

Ans: (i) Payment is made in instalments over a period of time.

(ii) Ownership is transferred only after full payment.

3. Write two advantages of hire-purchase system to the seller.

Ans: (i) It increases sales by attracting more customers.

(ii) The seller earns additional income through interest.

4. Write two advantages of hire-purchase system to the buyer.

Ans: (i) The buyer can use the goods immediately.

(ii) Payment can be made in easy instalments.

5. Write two disadvantages of hire-purchase system to the seller.

Ans: (i) There is a risk of default in payment by the buyer.

(ii) The seller has to wait for full payment.

6. Write two disadvantages of hire-purchase system to the buyer.

Ans: (i) The total cost is higher because of interest.

(ii) Ownership is obtained only after the final instalment is paid.

7. Write two differences between lease and hire-purchase.

Ans: (i) In hire-purchase, ownership is transferred after the last instalment, whereas in lease, ownership remains with the lessor.

(ii) Hire-purchase gives the option to purchase the asset, whereas lease generally does not transfer ownership.

C. Long Answer Questions (Type-I): 

1. State five features of hire-purchase system.

Ans: (i) Goods are purchased by paying an initial amount and the balance in instalments.

(ii) Ownership of the goods is transferred only after the final instalment is paid.

(iii) The buyer gets possession of the goods immediately after the agreement.

(iv) Interest is charged on the outstanding balance.

(v) The seller has the right to repossess the goods if the buyer fails to pay the instalments.

2. Write five advantages of hire-purchase system to the buyer.

Ans: (i) Hire buyer gets immediate possession of the goods.

(ii) Ownership is obtained by payment of instalments.

(iii) Instalments can be paid through earnings from the use of the goods.

(iv) The buyer has the option to return the goods if unable to continue payments.

(v) It avoids the need to secure outside finance.

3. Write the disadvantages of hire-purchase system to the seller and buyer.

Ans: Disadvantages to the Seller:

(i) Requires huge finance from the seller.

(ii) Difficulties in selecting reliable buyers.

Disadvantages to the Buyer:

(i) The total price is higher due to interest.

(ii) Future income is mortgaged for payment of instalments.

(iii) The buyer has no ownership rights until the last instalment is paid.

4. Write five differences between lease and hire-purchase system.

Ans:

Points	Lease	Hire-Purchase
(i) Ownership	The lessee may become the owner only if the purchase option is exercised at the end of the lease.	The hire buyer becomes the owner after payment of the last instalment.
(ii) Method of Financing	It is a method of financing business assets.	It is a method of financing both business assets and consumer articles.
(iii) Tax Benefits	Entire lease rental is tax deductible.	Only the interest component is tax deductible.
(iv) Down Payment	No down payment is required.	Down payment is required.
(v) Nature	In lease, we rent the asset.	In hire-purchase, we buy the goods.

D. Long Answer Questions (Type-II): 

1. What is hire-purchase system? State the features of hire-purchase system.

Ans: Hire-purchase is a system in which goods are purchased by paying a down payment and the balance in instalments. The buyer gets immediate possession of the goods, but ownership is transferred only after the payment of the last instalment.

Features of Hire-Purchase System:

(i) Goods are purchased by paying a down payment and the balance in instalments.

(ii) The buyer gets immediate possession of the goods.

(iii) Ownership is transferred only after payment of the last instalment.

(iv) Interest is charged on the outstanding balance.

(v) The seller has the right to repossess the goods if the buyer defaults in payment.

2. What is hire-purchase system? State the advantages and disadvantages of hire-purchase system to the buyer.

Ans: Hire-purchase is a system in which goods are purchased by paying a down payment and the balance in instalments. The buyer gets immediate possession of the goods, but ownership is transferred only after the payment of the last instalment.

Advantages to the Buyer:

(i) Hire buyer gets immediate possession of the goods.

(ii) Ownership is obtained by payment of instalments.

(iii) Instalments can be paid through earnings.

(iv) Option to return the goods.

(v) Avoidance of securing outside finance.

(vi) Habit of thriftiness.

(vii) Self-financing.

(viii) Guaranteed quality.

Disadvantages to the Buyer:

(i) High price due to interest.

(ii) Future income is mortgaged for instalment payments.

(iii) No ownership rights until the last instalment is paid.

3. What is hire-purchase system? State the advantages of hire-purchase system to the seller and buyer.

Ans: Hire-purchase is a system in which goods are purchased by paying a down payment and the balance in instalments. The buyer gets immediate possession of the goods, but ownership is transferred only after the payment of the last instalment.

Advantages to the Seller:

(i) Helps in increasing sales volume.

(ii) Provides security of payment.

(iii) The seller is entitled to receive interest.

Advantages to the Buyer:

(i) Hire buyer gets immediate possession of the goods.

(ii) Ownership is obtained by payment of instalments.

(iii) Instalments can be paid through earnings.

(iv) Option to return the goods.

(v) Avoidance of securing outside finance.

(vi) Habit of thriftiness.

(vii) Self-financing.

(viii) Guaranteed quality.