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The Hire purchase (Account template) template is an account template applied directly to a hire purchase liability account in the trial balance. For each asset held under hire purchase in that account, it builds a full month-by-month amortisation schedule from the agreement details you enter: purchase price, interest basis, repayment frequency and dates. It splits the closing balance between due within one year and due after one year, so the account reconciles to the ledger and the figures are ready for the accounts.

Table of contents 

When should I use this template?

Apply this account template to any hire purchase liability account in the trial balance. It supports up to 30 separate assets within a single account, so you do not need a new account for every asset unless the client's chart of accounts already splits balances that way. It is built for the classic hire purchase structure, a fixed repayment schedule against a specific asset, rather than open-ended finance or operating leases.

Before you start

Have each hire purchase agreement to hand: the asset, HP provider, purchase price, interest basis (rate or total finance cost), repayment amount and frequency, and the start and end dates. If the client splits current and non-current hire purchase balances across two accounts, apply the template to both. Each one reconciles independently, and both link out to the same Summary of Hire Purchase.

Background

A hire purchase liability is a financial liability normally carried at amortised cost, which in practice just means spreading interest and capital repayments over the term of the agreement. This template does that spreading for you. Its purpose is to turn the agreement's terms into a working amortisation schedule that supports the balance held in the account, rather than requiring the schedule to be built and checked manually every year. This template shares its underlying calculation with the Bank loans (Account template), adapted for hire purchase wording and the current/non-current split that hire purchase liabilities use.

Steps

  1. Add an asset. For each asset, enter its name, optionally attach the hire purchase agreement, and enter the date of purchase.
  2. Enter the purchase price. Record the purchase price and less any initial deposit paid. The template calculates the total amount financed.
  3. Choose the interest spreading method. Pick Fixed rate, Sum of digits or Straight line.
    • Fixed rate: enter the annual interest rate and the start date of interest payments. Interest is then recalculated each period on the reducing capital balance.
    • Sum of digits or Straight line: enter the initial and final admin fees and the total finance cost including interest. The template spreads the remaining charge over the term, weighted towards earlier periods for sum of digits, or evenly for straight line.
  4. Enter the repayment terms. Set the HP provider, whether there are any break clauses, the date of first payment (which defaults to the purchase date), the payment frequency (monthly, bimonthly, quarterly, biyearly or yearly), the date of the last payment (or break clause date), whether balances due after five years are paid by instalments, and the periodic repayment amount. The hire length in months is then calculated automatically.
  5. Review the amortisation schedule. The template generates a row for every period, showing capital brought forward, interest and other charges, total payments, adjustments, capital carried forward, and the due within 1 year / after 1 year split. Interest and payment amounts are pre-populated, but you can override them in any period if the actual amount differed.
  6. Handle a payment holiday if needed. Entering 0 in a period's payment field is treated as a payment holiday: the schedule automatically adds an extra period at the end so the liability still amortises to nil, with a note explaining the extension. You cannot enter a payment holiday as the very last period of the agreement, and a warning appears if you try.
  7. Reconcile the account. Choose what the account balance is being reconciled to, either the total capital balance, the amount due within one year, or the amount due after one year, matching what is posted in the account. Where the account sits on a standard due-within-1-year or due-after-1-year nominal code, only the relevant option is offered; otherwise all three are available. An unreconciled indicator flags any difference against the trial balance.
  8. Post the reclassification journal (optional). A Show journal summary toggle reveals a suggested adjustment reclassifying interest out of the liability account and moving the due-after-one-year portion between the current and non-current accounts, with a one-click button to post it. This is only offered on hire purchase accounts, since it addresses the current/non-current split specific to this liability.

If you need more than 30 assets on one account, a warning appears. Split the balance across an additional account instead, to avoid the template timing out.

What flows through to the rest of the accounts/workflow?

Every asset on this template feeds the Summary of Hire Purchase reconciliation, which rolls up every account using this template into a single client-wide schedule. Through account mapping, the due within one year / due after one year split also supports the current and non-current liability lines on the balance sheet and the hire purchase disclosure in the accounts.

What rolls forward next year?

The closing capital balance and the agreement's dates, rate and repayment terms carry the schedule forward automatically, so an existing agreement simply continues into its next period without you re-entering its terms. Any interest or payment overrides entered in a prior period are retained; only new payments, adjustments or new assets need to be added each year. An asset whose liability reaches a nil closing balance stops generating further rows.

Where the data comes from

The data is entirely user-entered: the hire purchase agreement details, repayment terms, and any monthly overrides. The only outbound link is to the Summary of Hire Purchase reconciliation, which reads the results calculated here. This template performs no calculations based on other templates.

Frequently asked questions

Why can't I add more than 30 assets to one account?

This is a deliberate limit to avoid the template timing out. Split the additional assets onto a second account using the same template.

Why did extra rows appear at the end of my asset's schedule?

Entering 0 as a payment in any period is treated as a payment holiday, and the schedule automatically extends by the same number of periods so the liability still fully amortises.

Why is there a warning that the capital balance isn't nil at the end of the agreement?

The final period's capital carried forward should reach zero. Check the repayment amount and dates entered, as a mismatch there usually means the schedule does not fully amortise the liability.

What does the "Show journal summary" toggle do?

It only appears on hire purchase accounts. It suggests an adjustment to reclassify the year's interest charge and to move the due-after-one-year portion of the balance to the correct account, and lets you post it directly from the template.