The interest charged on the hire purchase should appear in the profit and loss account in what manner?
A)the total interest levied should be divided equally over the total period the for purchase agreement
B)the interest charged in that period only should be included
C)interest should instead be capitalised on the balance sheet
D)interest should be apportioned in proportion to the repayment totals

Question

Quizplus · Accepted Answer

The interest charged in the specific period only should be included in the profit and loss account. This is because the profit and loss account reflects the expenses and revenues for a particular accounting period, and only the interest relevant to that period should be recognized as an expense.

The Interest Charged on the Hire Purchase Should Appear in the Profit