I have 2 questions rearding the Hire purchase agreement:
1. My client has had a car on hire purchase agreement for 2 years. When the contract came to an end, he had a choice- either buy it out for nearly 28 k or return it to the dealer. He chose the second option. My question is, what is the accounting treatment I should follow to remove the outstanding balance on Creditors/ HP>1 year? I have already removed the asset and the accumulated depreciation from accounts but the balance on Creditors is still outstanding.
2. He got a new car from the dealer on Hire purchase agreement again but told me that what he has paid for the old car (around 27k) has been lost as as soon as he returned the car and he paid a separate deposit for the new car. Should this amount be moved to costs?
Thank you in advace for your help