Hire Purchase
Long-Term LiabilitiesThis code records amounts relating to hire purchase, expected to be settled over a longer period, typically more than 12 months. As a liability account, it normally carries a credit balance: credit entries increase the balance (recording new amounts owed) and debit entries decrease it (recording payments made).
Real-world examples
Construction and logistics (heavy plant, vehicles)
A groundworks contractor acquires a £45,000 excavator on hire purchase, paid off over five years. On drawdown, the entry is a debit to a fixed asset code for the equipment and a credit of £45,000 to 2310 (Hire Purchase), recognising the asset and the liability together — no VAT applies to the finance itself, though VAT was typically charged and reclaimed on the underlying purchase price. Monthly instalments then split between reducing the 2310 balance (capital) and a finance charges code (interest). Construction and haulage fleets often run several HP agreements at once, so most keep a subsidiary schedule per asset rather than relying on one lump balance.
Smaller service businesses (single items of equipment)
A dental practice or a gym finances one significant item — a chair, or cardio equipment — worth a few thousand pounds on a three-year HP agreement. The accounting is the same in form as the construction example (debit the asset code, credit 2310 for the value financed) but at a much smaller scale, usually with just one or two agreements running at a time, so the balance is easy to reconcile against the finance company's statement without needing job-level tracking.
Commonly confused with
Because code 2302 (Directors' Loan Account (Director 2)) sits right next to this one in Long-Term Liabilities, it's a common mis-posting target. Code 2310 is specifically for hire purchase, while 2302 covers directors' loan account (director 2) — similar in nature, but keeping them separate is what makes the long-term liabilities section of your management accounts meaningful rather than a single lumped total.
What a mis-posting here costs you
An error posting to Hire Purchase misstates what the business owes, and for a Current Liabilities code specifically it can distort the working capital and current ratio that lenders and suppliers look at when assessing short-term financial health.