(a) Give three similarities and… | Commerce

Question 1 Report

(a) Give three similarities and three differences between hire purchase and deferred payment.

(b) Explain four reasons why a trader would prefer the use of cheque to cash for large payments.

Answer

(a) Hire purchase and deferred payment

Three similarities

Both allow the buyer to take possession and use the goods before completing full payment.
In both, payment is spread over an agreed period by instalments.
Both are forms of credit that enable buyers to obtain goods without paying the full price at once.

Three differences

Basis	Hire Purchase	Deferred Payment
Ownership	Ownership passes only after the last instalment is paid	Ownership passes to the buyer immediately on delivery
Right to repossess	Seller can repossess the goods if instalments are not paid	Seller cannot repossess; can only sue for the balance
Nature of transaction	Treated as hire until final payment	Treated as an outright credit sale from the start

(b) Four reasons a trader would prefer cheque to cash for large payments

Safety: A cheque, especially a crossed cheque, is safer than carrying large sums of cash which may be lost or stolen.
Proof of payment: The paid cheque and counterfoil serve as documentary evidence that payment was made.
Convenience: It is easier and less bulky to write one cheque for a large amount than to count and carry a large quantity of notes.
Payment can be stopped: The drawer can stop payment on a cheque if goods are not delivered or a fraud is discovered, which is impossible once cash is handed over.

Other acceptable point: a crossed cheque must pass through a bank account, providing a traceable record.

Answer Details

(a) Hire purchase and deferred payment

Three similarities

Both allow the buyer to take possession and use the goods before completing full payment.
In both, payment is spread over an agreed period by instalments.
Both are forms of credit that enable buyers to obtain goods without paying the full price at once.

Three differences

Basis	Hire Purchase	Deferred Payment
Ownership	Ownership passes only after the last instalment is paid	Ownership passes to the buyer immediately on delivery
Right to repossess	Seller can repossess the goods if instalments are not paid	Seller cannot repossess; can only sue for the balance
Nature of transaction	Treated as hire until final payment	Treated as an outright credit sale from the start

(b) Four reasons a trader would prefer cheque to cash for large payments

Safety: A cheque, especially a crossed cheque, is safer than carrying large sums of cash which may be lost or stolen.
Proof of payment: The paid cheque and counterfoil serve as documentary evidence that payment was made.
Convenience: It is easier and less bulky to write one cheque for a large amount than to count and carry a large quantity of notes.
Payment can be stopped: The drawer can stop payment on a cheque if goods are not delivered or a fraud is discovered, which is impossible once cash is handed over.

Other acceptable point: a crossed cheque must pass through a bank account, providing a traceable record.

(a) Give three similarities and three differences between hire purchase and deferred payment. (b) Explain four reasons why a trader would prefer the use of ...