CA – FOUNDATION: PRINCIPLES & PRACTICE OF ACCOUNTING BY CA. CS. ANSHUL A.

AGRAWAL

CHAPTER – 9

AVERAGE DUE DATE

TABLE OF CONTENTS
I. The Concept II. Practical Problems

1. THE CONCEPT

MEANING: It is a single date on which different sums of money due on different dates are settled with
consolidated sum, without any loss of interest to either party.

USEFULNESS:
a. Different transactions are settled with consolidated sum on a single date.
b. Calculation of interest on drawings of partners becomes easier.
c. Calculation of interest from Average Due Date till settlement date is possible.

STEPS FOR CALCULATING AVERAGE DUE DATE:

a. Calculate Due date from dates of transactions, using credit period.
b. Assume any of the due dates as a base date (also called as “Zero date” or “Start date”). Any date can be
taken as base date, but it is better to take first chronological due date as base date.
c. Calculate the number of days from the base date to the due date of each transaction.
d. Multiply the number of days so calculated by the corresponding amount of transaction. The resultant
figure is called ‘Product’.
e. Sum up the amount and product columns.
f. Divide the total of product by the total of amount. The result is the number of days.
g. Calculate average due date as per the following formula:
 Total Pr oduct 
Average Due Date = Base Date +   days
 Total Amount 
Notes:
1. Above formula can be used when amounts are either receivable or Payable. However if amounts are
receivable as well as payable then following formula should be used.
 Total Pr oduct Re ceivable - Total Pr oduct Payable 
Average Due Date = Base Date +/-   days
 Total Amount Re ceivable - Total Amount Payable 
2. If all the transactions are at the beginning or middle or at the end of month, Average Due Date may be
calculated with the help of monthly products.
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 CA – FOUNDATION: PRINCIPLES & PRACTICE OF ACCOUNTING BY CA. CS. ANSHUL A. AGRAWAL

2. PRACTICAL PROBLEMS

Q1. ADD – Trading Transaction, One Party REG. PAGE NO.

The following are the amounts due on different dates by A to B:
Rs. 500 due on 3rd July, Rs. 800 due on 2nd August and Rs. 1,000 due on 11th September.
Suggest a single date on which all the bills may be paid without any loss of interest to either of the party.

Q2. ADD – Trading Transaction, One Party REG. PAGE NO.

The following amounts are due to X by Y. Y wants to pay off (a) On 18 March or (b) On 14th July. Interest
th

rate of 8% P.A. is taken into consideration:

Rs. 500 due on 10th January, Rs. 1,000 due on 26th January (Republic Day), Rs. 3,000 on 23rd March and
Rs. 4,000 due on 18th August (Sunday).
Determine the amount to be paid in (a) and (b).

Q3. ADD – Multiple BOE, One Party REG. PAGE NO.

A Trader has accepted the following several bills falling due on different dates, now desires to have these
bills cancelled and to accept a new bill for the whole amount payable on the average due date:
SR. NO. DATE OF BILL AMOUNT TERM
1 1st March 2016 Rs. 400 2 Months
2 10th March 2016 Rs. 300 3 Months
3 5th April 2016 Rs. 200 2 Months
4 20th April 2016 Rs. 375 1 Months
5 10th May 2016 Rs. 500 2 Months
You are required to find the said average due date.

Q4. ADD – Multiple Transactions, One Party REG. PAGE NO.

A owes B Rs. 890 on 1 January 2015. From January to March, the following further transactions took
st

place between A and B.

January 16 A buys Goods Rs. 910
February 2 A receives cash loan Rs. 750
March 6 A buys Goods Rs. 810
A pays the whole amount on 31st March 2015 together with Interest at 5% p.a. Calculate the amount of
interest by average due date method.

Q5. ADD – Reciprocal Transactions, Two Parties REG. PAGE NO.

Two traders X and Y buys goods from one another, each allowing the other one month credit. At the end
of 3 months the accounts rendered are as follows:
GOODS SOLD BY GOODS SOLD BY
DATE DATE
X TO Y Y TO X
Apr 18 Rs. 60 Apr 23 Rs. 52
May 15 Rs. 70 May 24 Rs. 50
June 16 Rs. 80
Calculate the date upon which the balance should be paid so that no interest is due either on X or on Y.

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Q6. ADD – BR and BP with same party, Two Parties REG. PAGE NO.
Manoj has the following bills receivable and bills payable against Sohan. Calculate the average due date,
when the payment can be received or made without any loss of interest:
BILLS BILLS
DATE TENURE DATE TENURE
RECEIVABLE PAYABLES
01/06/2016 Rs. 3,000 3 Month 29/05/2016 Rs. 2,000 2 Month
05/06/2016 Rs. 2,500 3 Month 03/06/2016 Rs. 3,000 3 Month
09/06/2016 Rs. 6,000 1 Month 09/06/2016 Rs. 6,000 1 Month
12/06/2016 Rs. 1,000 2 Month
20/06/2016 Rs. 1,500 3 Month
Calculate the date upon which the balance should be paid so that no interest is due either on X or on Y.

Q7. ADD – When amount is repaid in Installments REG. PAGE NO.

Rs. 10,000 lent by Dass Bros. to Kumar & Sons. On 1 January 2011 is repayable in 5 equal annual
st

installments commencing from 1st January 2012. Find out the average due date and calculate interest at
5% P.A., which Dass Bros. will recover from Kumar & Sons.

Q8. ADD – Interest on Drawings REG. PAGE NO.

A and B, two partners of a firm, have drawn the following amounts from the firm in the year ending 31st
March, 2015:
DATE DRAWINGS BY A DATE DRAWINGS BY B
1st July Rs. 500 12th June Rs. 1,000
30th Sep Rs. 800 11th Aug Rs. 500
1st Nov Rs. 1,000 9th Feb Rs. 400
28th Feb Rs. 400 7th Mar Rs. 900
Interest at 6% p.a. is charged on all drawings. Calculate interest chargeable using (i) Ordinary system and
(ii) Average Due Date system (assuming 1 year as 365 days).

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 CA – FOUNDATION: PRINCIPLES & PRACTICE OF ACCOUNTING BY CA. CS. ANSHUL A. AGRAWAL
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“Always have never ending hunger for knowledge and challenge your appetite”.
- Anshul A. Agrawal

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