Q1A) (2 Marks)

i) False: Average due date results in.no loss to any party i.e. debtor or creditor.

ii) False: Average due date is mean date of several due. dates for payments.

iii) False: While calculating the average due date, any date may be taken as the base date.

iv) True: Red-ink interest is treated as negative interest.

v) False: There are three ways of preparing an Account Current: ( i) With help of interest table; (ii) By means of
products and (iii) By means of products of balances.

Q1B) In case the due date of a bill falls after the date of closing the account, then no interest is allowed for that.
However, interest from the date of closing to such 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. In
actual practice, however the product of such bill [value of bill X (due date-closing date) is written in ordinary ink in
the opposite side onwhich the bill is entered]. (5 Marks)

Q1C) If no specific date is mentioned as the date on which the payment is due, the date of the transaction itself is to
be presumed to be the due date. In calculating the number of days, either the date of the transaction or the due
date is excluded.

In case of opening balance, number of days are to be calculated including both opening and closing dates. For the
purchase return transaction, take the same due date of related purchase transaction. Similarly for the sale return
transaction, take the same due date of related sale transaction. (5 Marks)

Q2A) CALCULATION OF AVERAGE DUE DATE [BASE DATE 1ST APRIL]

Due Date Amount No. of Days from Base Date to Due Date Products
Rs. Rs.

April 1 198,000 0 0

April 10 495,000 9 4455,000

May 16 990,000 45 44,550,000

June 9 297,000 69 20493,000

1980,000 69498,000

Average Due Date = Base Date + Days equal to Total of Products/Total

Amount days Average Due Date = 1st April + 69498,000/1980,000

= 1st April + 35.1 days= 6th May, 2022

 Interest therefore has been calculated on Rs. 20,000 from 6th May, 2022 to 30th June, 2022 i.e.,

for 55 days @ 15% per annum.

Interest = 1980,000 × 15/100×55/365 = Rs. 44752.95 (10 Marks)

Q2B) MR. Amit IN ACCOUNT CURRENT WITH MR. Zakir

Dr. (INTEREST UPTO 15TH MARCH, 2022 @10% P.A.) Cr.
Date Particulars Rs. Days Product Date Particulars Rs. Days Product
2022 2022

Jan.01 To Balance b/d 176,000 75 88,00,000 Jan29 By 52800 46 2472800

PurchasesA/c

Jan15 To Sales A/c 981200 60 58872000 Feb10 By Cash A/c 44,000 34, 1496,000

Mar.13 To Red ink Mar13 By Bills

product Receivable A/c 44,000

(Rs.88,000 x 29) 2552,000 Mar15 By Balance of

Mar To Interest A/c 4840 product 17688,000

(Rs 17714400 x 10 x 1)
/
(100 × 366)

278960 21639200 278960 21639200

(10 Marks)

Sol 3 (10 Marks)

Taking 19.6.2022 as a Base date

Transaction Date Due Date Amount Amount

8.3.2018 11.7.2018 36,000 22 792,000

16.3.2018 19.6.2018 45,000 0 0
7.4.2018 10.9.2018 54,000 83 4482,000
17.5.2018 20.8.2018 45,000 62 2790,000
180,000 8064,000
Average Due Date= date Base+ Total of Product/ Total of Amount

= 19.6.2022 + ` 8064,000/`180,000
= 19.6.2022 + 44.8 days (or 45 days approximately)
= 3.8.2022
Mehnaaz wants to save interest of ` 1413 The yearly interest is ` 180,000 × 18% = ` 32400.
Assume that days corresponding to interest of ` 1413 are Y.
Then, 32400 × Y/365 = ` 1413
or Y = 1413 × 365/3,600 = 15.9 days or 16 days (Approx.)
Hence, if Mehnaaz wants to save ` 1413 by way of interest, she should prepone the payment of amount involved by 16 days from
the Average Due Date. Hence, she should make the payment on 18.7.2022 (3.8.2022 – 16 days).