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# 7

## Average Due Date

Unit 1: Average Due Date
Question 1
A promissory note executed by Mr. X is due on 12.8.2007. What is the maturity date of the
promissory note including grace days?
(2 Marks, May, 2007) (PCC)
Where the promissory note is due (including grace days) on public holiday, the preceding day
shall be the due date. Hence, the due date is 14.8.2007.
Question 2
Mr. A advanced ` 30,000 to Mr. B on 1.4.2008. The amount is repayable in 6 equal monthly
instalments commencing from 1.5.2008. Compute the average due date for the loan.
(2 Marks, May, 2008) (PCC)
Average due date =

## Date of loan + Sum of months from the date of lending to repayment

No. of instalments

= 1.4.2008 +

(1 + 2 + 3 + 4 + 5 + 6)
6

## = 1.4.2008 + 3.5 months = 16th July 2008

Question 3
R had the following bills receivable and bills payable against S. Calculate average due date
when the payment can be made or received without any loss or gain of interest to either party.
Bills Receivable
Date of the Bill
1.6.08

Amount (`)
9,000

Bills Payable
Tenure in
months
3

Date of bill

Amount (`)

29.5.08

6,000

Tenure in
months
2

## Average Due Date

5.6.08

7,500

3.6.08

9,000

9.6.08

10,000

10.6.08

10,000

12.6.08

8,000

13.6.08

7,000

20.6.08

12,000

27.6.08

11,000

7.2

Holiday intervening in the period 15th August, 2008, 16th August, 2008, and 6th September, 2008.
(4 Marks, November, 2008) (PCC)
Calculation of Average Due Date (taking base date as 12th July, 2008)
Date
1.6.08
5.6.08
9.6.08
12.6.08
20.6.08

Due date
including days
of grace
4.9.08
8.9.08
12.7.08
14.8.08
23.9.08

29.5.08
3.6.08
10.6.08
13.6.08
27.6.08

1.8.08
5.9.08
13.8.08
14.8.08
30.7.08

Difference of Products
Difference of Amount
Average Due Date

Amount (`)

No. of Days
from July 12

Products (`)

Remarks

9,000
54
4,86,000 Bills Receivable
7,500
58
4,35,000
10,000
0
0
8,000
33
2,64,000
12,000
73
8,76,000
46,500
20,61,000
6,000
20
1,20,000
Bills Payable
9,000
55
4,95,000
10,000
32
3,20,000
7,000
33
2,31,000
11,000
18
1,98,000
43,000
13,64,000
=
` 20,61,000 ` 13,64,000 = ` 6,97,000
=
` 46,500 ` 43,000 = ` 3,500
=
Differenceof Pr oducts
Base Date +
Differenceof Amount
=
6,97,000
July 12 +
3,500
=
July 12 + 199.14 or 199 days
=
27th January, 2009

Note:
(i)

B/R of 12.6.08

(ii)

B/P of 3.6.08

(iii)

B/P of 13.6.08

## The Institute of Chartered Accountants of India

7.3

Accounting

Question 4
Harish has the following bills due on different dates. It was agreed to settle the total amount
due by a single cheque payment. Find the date of the cheque.
(i)

(ii)

## (iii) ` 6,000 due on 17.7.2009

(iv) ` 8,000 due on 14.9.2009

## (4 Marks, November, 2009) (PCC)

Calculation of number of days from the base date
Due date

Amount (` )

## No. of days from 5.3.09

Product

5.3.2009

5,000

7.4.2009

7,000

33

2,31,000

17.7.2009

6,000

134

8,04,000

14.9.2009

8,000

193

15,44,000

26,000
Average due date = Base date +
= 5.3.2009 +

25,79,000

Sum of Product
Sum of Amount
25,79,000
= 99 days
26,000

The date of the cheque will be 99 days from the base date i.e.12.6.2009.
12th June, 2009, all bills will be settled by a single cheque payment.

So on

Question 5
A trader allows his customers, credit for one week only beyond which he charges interest @
12% per annum. Anil, a customer buys goods as follows:
Date of Sale/Purchase
January 2, 2009
January 28, 2009
February 17, 2009
March 3, 2009

Amount (` )
6,000
5,500
7,000
4,700

Anil settles his account on 31st March, 2009. Calculate the amount of interest payable by Anil
using average due date method.
(8 Marks, November, 2009) (IPCC)

7.4

Date of Sale

Due date of
payment
Jan. 9
Feb. 4
Feb. 24
March 10

Jan. 2
Jan. 28
Feb. 17
March 3

## Average Due date = Base date +

= 9th January, 2009 +

Amount (`
)
6,000
5,500
7,000
4,700
23,200

Product

January, 2009
0
26
46
60

0
1,43,000
3,22,000
2,82,000
7,47,000

Sum of Pr oduct
Sum of amount

7,47,000
23,200

## = 9th January 2009 + 32 days

i.e. 32 days from 9th January, 2009 = 10th February, 2009
Thus, average due date = 10th February, 2009
No. of days from 10th February, 2009 to 31st March, 2009 = 49 days.
Interest payable by Anil on ` 23,200 for 49 days @ 12% per annum
= ` 23,200

49 12

= ` 373.74
365 100

Question 6
Swaminathan owed to Subramanium the following sums :

## ` 5,000 on 20th January, 2009

` 8,000 on 3rd March, 2009
` 6,000 on 5th April, 2009
` 11,000 on 30th April, 2009
Ascertain the average due date.

## (2 Marks, May, 2010) (IPCC)

Calculation of average due date taking 20th January as the base date
Due Date

Amount

`
20th January

5,000

January
0

Product

7.5

Accounting

3rd March
5th April
30th April

8,000
6,000
11,000
30,000

42
75
100

= 20th January +

Total Product
Total Amount

= 20th January +

18,86,000
30,000

3,36,000
4,50,000
11,00,000
18,86,000

## = 20th January, 2009 + 63 days (approx)

= 24th March, 2009
Question 7
From the following details find out the average due date:
Date of Bill
29th January, 2009
20th March, 2009
12th July, 2009
10th August, 2009

Usance of Bill
1 month
2 months
1 month
2 months

Amount (`)
5,000
4,000
7,000
6,000

## (4 Marks, November, 2010) (IPCC)

Calculation of Average Due Date
(Taking 3rd March, 2009 as base date)
Date of bill 2009

29th
20th

January
March

12th July
10th August

Term

Due date
2009

Amount

No. of days
from the base
date i.e. 3rd
March,2009

Product

(`)

(`)

(`)

5,000

May

4,000

81

3,24,000

1month

14th Aug.

7,000

164

11,48,000

2 months

13th Oct.

6,000

224

13,44,000

1 month
2 months

3rd

March

23rd

22,000

28,16,000

## 9th July, 2009

7.6

Sum of Products
Sum of Amounts

28,16,000
22,000

Working Note:

1.

Bill dated 29th January, 2009 has the maturity period of one month, but there is no
corresponding date in February, 2009. Therefore, the last day of the month i.e. 28th
February, 2009 shall be deemed maturity date and due date would be 3rd March, 2009
(after adding 3 days of grace).

2.

Bill dated 12th July, 2009 has the maturity period of one month, due date (after adding 3
days of grace) falls on 15th August, 2009. 15th August being public holiday, due date
would be preceding date i.e. 14th August, 2009.

Question 8
A and B are partners in a firm and share profits and losses equally. A has withdrawn the
following sum during the half year ending 30th June 2010:
Date

Amount

`
January 15
February 10
April 5
May 20
June 18

5,000
4,000
8,000
10,000
9,000

Interest on drawings is charged @ 10% per annum. Find out the average due date and
calculate the interest on drawings to be charged on 30th June 2010.
(4 Marks, May, 2011) (IPCC)
Calculation of Average due date
(Base Date 15th Jan, 2010)
Date

Amount

No. of days

`
January 15

5,000

Product
`

7.7

Accounting

February 10

4,000

26

1,04,000

April 5

8,000

80

6,40,000

May 20

10,000

125

12,50,000

June 18

9,000

154

13,86,000

36,000
Average due date

= Base date +
= 15th Jan +

33,80,000

Total product
days
Total amount

33,80,000
days
36,000

## = 15th Jan + 94 days (approx.)

= 19th April, 2010
Number of days from 19th April, 2010 to 30th June, 2010 = 72 days
Interest on drawings from 19th April to 30th June @10%:
= ` 36,000

72 10

365 100

= ` 710
Hence, interest on drawings ` 710 will be charged from A on 30th June, 2010.
Question 9
Mr. Black accepted the following bills drawn by Mr. White:
Date of Bill

Period

09-03-2010

4 months

4,000

16-03-2010

3 months

5,000

07-04-2010

5 months

6,000

18-05-2010

3 months

5,000

Amount (`)

He wants to pay all the bills on a single date. Interest chargeable is @ 18% p.a. and
Mr. Black wants to save ` 150 on account of interest payment. Find out the date on which he
has to effect the payment to save interest of ` 150. Base date to be taken shall be the
earliest due date.
(8 Marks, November, 2011) (IPCC)

The word save should be read as earn for better understanding of the requirement of the question.

## Average Due Date

7.8

Calculation of Average Due Date taking base date as 19.06.2010
Date of Bill

Period

Maturity
date

09.03.2010
16.03.2010
07.04.2010
18.05.2010

4 months
3 months
5 months
3 months

12.07.2010
19.06.2010
10.09.2010
21.08.2010

## No. of days from the

base date

Amount
(`)
4,000
5,000
6,000
5,000
20,000

23
0
83
63

Products
92,000
0
4,98,000
3,15,000
9,05,000

Total of pr oduct
Total of amount

= 19.06.2010 +

9,05,000
= 45 days (approx.)
20,000

## = 3rd August, 2010.

Computation of date of payment to earn interest of ` 150

## Interest per day = [` 20,000 x (18/100)]/365 days

= ` 3,600/365 = ` 10 per day (approx.)
To earn interest of ` 150, the payment should be made 15 days (` 150 / ` 10 per day) earlier
to the due date. Accordingly, the date of payment would be:
Date of payment to earn interest of ` 150 = 3rd August, 2010 15 days
= 19th July, 2010.
Question 10
M/s Stairs & Co. draw upon M/s Marble & Co. several bills of exchange due for payment on
different dates as under :
Date of Bill
12th May
10th June
1st July
19th July

Amount(`)
44,000
45,000
14,000
17,000

Tenure of Bill
3 months
4 months
1 month
2 months

Find out the average due date on which payment may be made in one single amount by M/s
Marble & Co. to M/s Stairs & Co. 15th August, Independence Day, is national holiday and
22nd September declared emergency holiday, due to death of a national leader.
(4 Marks, May 2012) (IPCC)

## The Institute of Chartered Accountants of India

7.9

Accounting

Calculation of Average Due Date
(Taking 4th August as the base date)
Date of bill

Term

Due date

12th May
10th June
1st July

3 months
4 months
1 month

14th August
13th October
4th August

19th July

2 months

23th September

= 4th August +

## Amount No. of days from

` the base date i.e.
4th August

Product

44,000
45,000
14,000

10
70
0

4,40,000
31,50,000
0

17,000
1,20,000

50

8,50,000
44,40,000

Total of products
Total amount

44,40,000
1,20,000

## = 4th August +37 days = 10th September

Question 11
T owes to K the following amounts:

## ` 7,000 due on 15th March, 2012

` 12,000 due on 5th April, 2012
` 30,000 due on 25th April, 2012
` 20,000 due on 11 June, 2012
He desires to make the full payment on 30th June, 2012 along with interest @ 10% per annum
from the average due date. Find out the average due date and the amount of interest. Amount
of interest may be rounded off to the nearest rupee.
(4 Marks, November 2012) (IPCC)
Calculation of Average Due Date taking 15th March, 2012 as the base date
Due date

Amount

## No. of days from the base

date i.e. 15th March, 2012

Product

`
15th

March, 2012
April, 2012
25th April, 2012
5th

7,000
12,000
30,000

0
21
41

0
2,52,000
12,30,000

Average due date

20,000
69,000

88

## = Base date + Days equal to

= 15th March, 2012 +

7.10

17,60,000
32,42,000

Total of products
Total amount

32,42,000
69,000

## = 15th March, 2012 + 47 days (approx.) =1st May, 2012

Interest amount: Interest can be calculated on ` 69,000 from 1st May, 2012 to 30th June,
2012 at 10% p.a. i.e. interest on ` 69,000 for 60 days at 10%p.a. =` 69,000 x 10/100 x 60/366
= ` 1,131 (approx.)
Question 12
The following transactions took place between Thick and Thin. They desire to settle their
account on average due date.
Purchases by Thick from Thin
9th July, 2013

(` )
7,200

12,200

(` )

18,000

## 31st August, 2013

16,500

Calculate Average Due Date and the amount to be paid or received by Thick.
(4 Marks, November 2013) (IPCC)

Calculation of Average Due Date
Computation of products for Thicks payments
(Taking 9.7.13 as base date)
Due Date

`
9.7.13
14.8.13

7,200
12,200
19,400

## The Institute of Chartered Accountants of India

Product

`
0
36

0
4,39,200
4,39,200

7.11

Accounting
Computation of products for Thins payments (Base date = 9.7.13)

Due Date

date

Product

`
15.7.13
31.8.13

18,000
16,500
34,500

`
6
53

5,43,300

## Excess of Thins amounts over Thick [34,500-19,400]

Number of days from base date to date of settlement is =

1,08,000
8,74,500
9,82,500
15,100

5,43,300
= 36 days (approx.)
15,100

Hence, the date of settlement of the balance amount is 36 days after 9th July, i.e. 14th August.
Thus, on 14th August, 2013, Thin has to pay ` 15,100 to Thick.
Question 13
Define Average Due Date. List out the various instances when Average Due Date can be
used.
(4 Mark, IPCC May, 2014)

In business enterprises, a large number of receipts and payments by and from a single party may
occur at different points of time. To simplify the calculation of interest involved for such
transactions, the idea of average due date has been developed. Average Due Date is a break-even
date on which the net amount payable can be settled without causing loss of interest either to the
borrower or the lender.
Few instances where average due date can be used:
(i)

## Calculation of interest on drawings made by the proprietors or partners of a business firm

at several points of time.

(ii)

## Settlement of accounts between a principal and an agent.

(iii) Settlement of contra accounts, that is, A and B sell goods to each other on different
dates.
Question 14
Kishanlal has made the following sales to Babulal. He allows a credit period of 10 days
beyond which he charges interest @ 12% per annum.
Date of Sales

Amount (`)

26.05.14

12,000

## Average Due Date

18.07.14

18,000

02.08.14

16,500

28.08.14

9,500

09.09.14

15,500

17.09.14

13,500

7.12

Babulal wants to settle his accounts on 30-9-2014. Calculate the interest payable by him using
Average Due Date (ADD). If Babulal wants to save interest of ` 588, how many days before
30.9.2014 does he have to make payment? Also find the payment date in this case.
(4 Marks, IPCC November, 2015)
Calculation of Average Due date (Taking 05th June as the base date)
Date

Due Date

Amount

## No. of days from

Base date

Product

26.05.2014

05.06.2014

12,000

18.07.2014

28.07.2014

18,000

53

9,54,000

02.08.2014

12.08.2014

16,500

68

11,22,000

280.8.2014

07.09.2014

9,500

94

8,93,000

09.09.2014

19.09.2014

15,500

106

16,43,000

17.09.2014

27.09.2014

13,500

114

15,39,000

85,000
Average due date

= 5.6.14 +

61,51,000

61,51,000
= 5.6.14 + 72 days (app.) = 16.08.2014
85,000

## Interest if settlement is done on 30.9.14

85,000 x 12% x

45
= ` 1,258 (approx.)
365

If Babulal wants to save interest of ` 588, then he has to make the payment following days
before 30.09.2014:
= 588/1258 X 45 days (16.08.2014 to 30.09.2014) = 21 days earlier
Payment date, in the above case, will be 09.09.2014.

## The Institute of Chartered Accountants of India

7.13

Accounting
Unit 2: Account Current

Question 1
What is meant by Red-Ink interest in an Account Current? (2 Marks) (November, 2007) (PCC)

In an Account Current, interest is calculated on the amount of a bill from the date of
transaction to the closing date of the period concerned. In case the due date of the bill falls
after the closing date of the account, then no interest is allowed for that period. However, it is
customarily followed that interest from the date of closing to the due date is written in red ink
in the appropriate side of the Account Current. This interest is called Red-Ink Interest. This
Red-Ink interest is treated as negative interest.
Question 2
What is Account current?

## (2 Marks, May, 2008) (PCC)

Account current is a running statement of transactions between parties, maintained in the form
of a ledger account, for a given period of time and includes interest allowed or charged on
various items. It is prepared when transactions regularly take place between two parties. An
account current has two parties one who renders the account and the other to whom the
account is rendered.
Question 3
Roshan has a current account with partnership firm. It has debit balance of ` 75,000 as on
01-07-2012. He has further deposited the following amounts:
Date

Amount (`)

14-07-2012

1,38,000

18-08-2012

22,000

## He withdrew the following amounts :

Date

Amount (`)

29-07-2012

97,000

09-09-2012

11,000

Show Roshan's A/c in the ledger of the firm. Interest is to be calculated at 10% on debit
balance and 8% on credit balance. You are required to prepare current account as on 30th
September, 2012.
(4 Marks, November 2013) (IPCC)

## Average Due Date

7.14

Roshans Current Account with Partnership firm (as on 30.9.2012)
Date

Particulars

Dr

Cr

(`)
01.07.12

To Bal b/d

14.07.12

By Cash A/c

29.07.12

To Self

18.08.12

By Cash A/c

09.09.12

To Self

30.09.12

To Interest A/c

30.09.12

By Bal. c/d

(`)

## Balance Dr. Days Dr Product

or
(`)
(`) Cr.

75,000

75,000 Dr.

13

63,000 Cr.

15

34,000 Dr.

20

6,80,000

12,000 Dr.

22

2,64,000

11,000

23,000 Dr.

22

5,06,000

457

23,457 Dr.

1,38,000
97,000
22,000

Cr
Product
(`)

9,75,000
9,45,000

23,457
1,83,457

1,83,457

24,25,000

9,45,000

Interest Calculation:

## On ` 24,25,000x 10% x 1/365 =

` 664

On ` 9,45,000 x 8% x 1/365 =

(` 207)

## Net interest to be debited

(` 457)

Note: The above current account has been prepared by means of product of balances method.
Question 4
From the following particulars prepare a current account, as sent by Mr. Ram to Mr. Siva as
on 31st October 2014 by means of product method charging interest @ 5% p.a.
2014

Particulars

1st

July

`
750

15th August

20th August

200

22nd Sep

800

15th

500

Oct

1250

## The Institute of Chartered Accountants of India

7.15

Accounting

Siva in Account Current with Ram as on 31st Oct, 2014
Dr.

Cr.
`

Days

750

123

92,250 20.08.14

By
Sales
Returns

200

72

14,400

77

96,250 22.09.14

By Bank

800

39

31,200

15.10.14

By Cash

500

16

01.07.14

To Bal. b/d

15.8.14

To Sales

1,250

31.10.14

To Interest

18.48

Product
(`)

` Days

By Balance
of Products
_____
2018.48

Interest = ` 1,34,900 x

______ 31.10.14
1,88,500

5
1

= ` 18.48
100 365

By Bal. c/d

Product
(`)

8,000
1,34,900

518.48

______

2018.48

1,88,500