7
Average Due Date and
Account Current
UNIT 1: AVERAGE DUE DATE
BASIC CONCEPTS AND STEPS TO SOLVE THE PROBLEMS
Interest
 Average Due Date is one on which the net amount payable can
calculation on
be settled without causing loss of interest either to the borrower
basis
of
or the lender.
Average Due
Date
 When the amount is lent in various instalments then average due
date can be calculated as:
Average due date = Base date ±
Total of [Amount × No. of days from
base date to due date]
Total amounts
 When interest is chargeable on drawings, and drawings are on
different dates, interest may be calculated on the basis of Average
Due Date of drawings.
 Average due date in a case where the amount is lent in one
instalment and repayment is done in various instalments will be:
Average due date = Date of Loan
Question 1
E owes to F the following amounts:
` 5,000 due on 10th March, 2011
` 18,000 due on 2nd April, 2011
` 60,000 due on 30th April, 2011
` 2,000 due on 10th June, 2011
© The Institute of Chartered Accountants of India
Sum of days/months/Years from the date
of lending to the date of repayment of
+ each instalment
Number of instalments
7.2
Accounting
He desires to make the full payment on 30th June, 2011 with interest at 10% per annum after the
average due date. Find out the average due date and the amount of interest.
Answer
Calculation of Average Due Date
Taking 10th March, 2011 as the base date.
Due date
No. of days from the base
date i.e. 10th March, 2011
Amount
2011
`
10th March
Product
`
5,000
0
0
2nd April
30th April
18,000
60,000
23
51
4,14,000
30,60,000
10th June
2,000
85,000
92
1,84,000
36,58,000
Average due date=Base date+ Days equal to
= 10th March +
Total of products
Total amount
R`36,58,000
` 85,000
= 10th March + 43 days =22nd April, 2011
Interest amount: Interest can be calculated on ` 85,000 after 22nd April, 2011 to 30th June,
2011 at 10% p.a. i.e. interest on ` 85,000 for 69 days at 10%.
=` 85,000 x 10/100 x 69/365 = ` 1,607 (approx.)
Question 2
Calculate average due date from the following informations:
Date of bill
Term
Amount (`)
1st
2 months
4,000
3 months
3,000
5th April, 2011
2 months
2,000
20th April, 2011
1 months
3,750
10th May, 2011
2 months
5,000
March, 2011
10th
March, 2011
© The Institute of Chartered Accountants of India
Average Due Date and Account Current
7.3
Answer
Calculation of Average Due Date
(Taking 4th May, 2011 as the base date)
Date of bill
Term
Due date
Amount
`
2011
1st
5th
March
April
20th
Product
`
2011
March
10th
No. of days from
the base date i.e.
May 4, 2011
April
10th May
2 months
4th
3 months
13th
May
4,000
0
0
2 months
8th
3,000
40
1,20,000
1 month
23rd
2,000
35
70,000
May
3,750
19
71,250
2 months
13th July
5,000
70
3,50,000
June
June
17,750
Average due date=Base date+ Days equal to
= 4th May, 2011 +
6,11,250
Total of products
Total amount
R` 6,11,250
= 4th May, 2011 + 35 days = 8th June, 2011
17,750
Question 3
‘A’ lent ` 25,000 to ‘B’ on 1st January, 2011. The amount is repayable in 5 half-yearly
installments commencing from 1st January, 2012. Calculate the average due date and interest
@ 10% per annum.
Answer
Calculation of sum of periods from the date of each transaction:
1st payment is made after 12 months from the date of loan.
2nd payment is made after 18 months from the date of loan.
3rd payment is made after 24 months from the date of loan.
4th payment is made after 30 months from the date of loan.
5th payment is made after 36 months from the date of loan.
Sum of the months =120
Average due date =
Date of loan +
Sum of months from 1st January, 2011 to the date of each installment
Number of installments
© The Institute of Chartered Accountants of India
7.4
Accounting
=1st January, 2011 +
120 months
5
=1st January, 2011+ 24 months
=1st January, 2013
Interest = ` 25,000 x 10/100 x 2 years
=` 5,000
Question 4
Calculate average due date from the following information:
Date of bill
Term
16th
Amount (`)
August, 2010
3 months
3,000
20th
October, 2010
14thDecember, 2010
60 days
2 months
2,500
2,000
24th January, 2011
06th March, 2011
60 days
2 months
1,000
1,500
Answer
Calculation of Average Due Date
(Taking November 19, 2010 as the base date)
Date of bill
Term
Due date
(including 3
grace days)
Amount
`
No. of days Product (no.
from the base
of days x
date
amount)
16th August, 2010
3 months Nov. 19, 2010
3,000
0
0
20th
October, 2010
60 days
Dec. 22, 2010
2,500
33
82,500
14th
December, 2010 2 months Feb. 17, 2011
2,000
90
1,80,000
1,000
1,500
129
171
1,29,000
2,56,500
24th January, 2011
06th March, 2011
60 days March 28 , 2011
2 months May 09, 2011
10,000
Average due date=Base date+ Days equal to
Total of products
Total amount
= November 19, 2010 +6,48,000/10,000
= November 19, 2010 + 65 days = January 23, 2011
© The Institute of Chartered Accountants of India
6,48,000
Average Due Date and Account Current
7.5
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, 2012
January 28, 2012
February 17, 2012
March 3, 2012
Amount (`)
6,000
5,500
7,000
4,700
Anil settles his account on 31st March, 2012. Calculate the amount of interest payable by Anil
using average due date method.
Answer
Let us assume 9th January, 2012 to be the base date:
Date of
Sale
Due date of
payment
Jan. 2
Jan. 28
Jan. 9
Feb. 4
Feb. 17
Feb. 24
March 3
March 10
Average Due date = Base date +
= 9th January, 2012 +
No. of days from
9th January, 2012
Product
6,000
5,500
0
26
0
1,43,000
7,000
46
3,22,000
4,700
23,200
61
2,86,700
7,51,700
Amount (`)
Sum of Pr oduct
Sum of amount
7,51,700
= 33days
23,200
33 days from 9th January, 2012 = 11th February, 2012
Thus, average due date = 11th February, 2012
No. of days after 11th February, 2012 to 31st March, 2012 = 49 days.
Interest payable by Anil on ` 23,200 for 49 days @ 12% per annum
= ` 23,200 x
© The Institute of Chartered Accountants of India
12
49
x
= ` 372.72
366 100
7.6
Accounting
Question 6
From the following details find out the average due date:
Date of Bill
January, 2012
th
20 March, 2012
12th July, 2012
10th August, 2012
Usance of Bill
1 month
2 months
1 month
2 months
Amount (`)
5,000
4,000
7,000
6,000
29th
Answer
Calculation of Average Due Date
(Taking 3rd March, 2012 as base date)
Date
2012
of
29 th
January
March
12 th July
10 th August
20 th
bill
Term
Due
2012
date
3 rd
March 1
1 month
2 months
1month
2 months
Average due date
23 rd May
14 th Aug. 2
13 th Oct.
Amount
(`)
5,000
4,000
7,000
6,000
22,000
No. of days from
the base date i.e.
3 rd March,2012
(`)
0
81
164
224
Product
(`)
0
3,24,000
11,48,000
13,44,000
28,16,000
Sum of Products
Sum of Amounts
=
Base date + Days equal to
=
3rd March, 2012 +
=
3rd March, 2012 + 128 days = 9th July, 2012
28,16,000
22,000
Question 7
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 2012:
Bill dated 29th January, 2012 has the maturity period of one month and since 2012 is a leap year 29th
February, 2012 shall be the maturity date and due date would be 3rd March, 2012 (after adding 3 days
of grace).
2 Bill dated 12 th July, 2012 has the maturity period of one month, due date (after adding 3 days of
grace) falls on 15th August, 2012. 15th August being public holiday, due date would be preceding date
i.e. 14th August, 2012.
1
© The Institute of Chartered Accountants of India
Average Due Date and Account Current
Date
7.7
Amount (`)
January 15
February 10
5,000
4,000
April 5
May 20
8,000
10,000
June 18
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 30 th June 2012
Answer
Date
January 15
February 10
April 5
May 20
June 18
Average due date
Calculation of Average due date
(Base Date 15th Jan, 2012)
Amount
No. of days
from base date
`
5,000
0
4,000
26
8,000
81
10,000
126
9,000
155
36,000
= Base date +
= 15th Jan +
Product
`
0
1,04,000
6,48,000
12,60,000
13,95,000
34,07,000
Total product
× days
Total amount
34,07,000
days
36,000
= 15th Jan + 95 days = 19th April, 2012
Number of days after 19th April, 2012 to 30th June, 2012 = 72 days
Interest on drawings after 19th April to 30th June @10%:
= ` 36,000 ×
72 10
= ` 708
×
366 100
Hence, interest on drawings ` 708 will be charged from A on 30th June, 2012.
Question 8
Mr. Black accepted the following bills drawn by Mr. White:
Date of Bill
09-03-2011
Period
4 months
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Amount (`)
4,000
7.8
Accounting
16-03-2011
07-04-2011
18-05-2011
3 months
5 months
3 months
5,000
6,000
5,000
He wants to pay all the bills on a single date. Interest chargeable is @ 18% p.a. and
Mr. Black wants to earn ` 150 on account of interest payment. Find out the date on which he
has to effect the payment to earn interest of ` 150. Base date to be taken shall be the earliest
due date.
Answer
Calculation of Average Due Date taking base date as 19.06.2011
Date of Bill
Period
Maturity date
09.03.2011
16.03.2011
07.04.2011
18.05.2011
4 months
3 months
5 months
3 months
12.07.2011
19.06.2011
10.09.2011
21.08.2011
Average due date = Base date +
= 19.06.2011 +
No. of days from the
base date
23
0
83
63
Amount
(`)
4,000
5,000
6,000
5,000
20,000
Products
92,000
0
4,98,000
3,15,000
9,05,000
Total of pr oduct
Total of amount
9,05,000
= 19.06.2011 + 46 days = 4th August, 2011.
20,000
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 = 4th August, 2011 –15 days = 20th July, 2011.
Question 9
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 11th June, 2012
© The Institute of Chartered Accountants of India
Average Due Date and Account Current
7.9
He desires to make the full payment on 30th June, 2012 along with interest @ 10% per annum
after 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.
Answer
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
11th June 2012
7,000
12,000
30,000
20,000
69,000
5th
Average due date
0
21
41
88
= Base date + Days equal to
= 15th March, 2012 +
0
2,52,000
12,30,000
17,60,000
32,42,000
Total of products
Total amount
32,42,000
69,000
= 15th March, 2012 + 47 days =1st May, 2012
Interest amount: Interest can be calculated on ` 69,000 after 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.)
Note: Alternatively, interest can be calculated on the basis of 365 days instead of 366 days.
In such a case, interest amount will be ` 1,134 (approx.) instead of ` 1,131.
Question 10
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
14th August, 2013
12,200
Sales by Thick to Thin
15th July, 2013
(` )
18,000
31st August, 2013
16,500
Calculate Average Due Date and the amount to be paid or received by Thick.
© The Institute of Chartered Accountants of India
7.10
Accounting
Answer
Calculation of Average Due Date
Computation of products for Thick’s payments
(Taking 9.7.13 as base date)
Due Date
Amount
No. of days from base date to due
date
`
7,200
12,200
19,400
9.7.13
14.8.13
Product
`
0
36
0
4,39,200
4,39,200
Computation of products for Thin’s payments (Base date = 9.7.13)
Due Date
Amount No. of days from base date to due
date
Product
`
15.7.13
31.8.13
`
18,000
16,500
34,500
6
53
1,08,000
8,74,500
9,82,500
Excess of Thin’s products over Thick [9,82,500-4,39,200]
5,43,300
Excess of Thin’s amounts over Thick [34,500-19,400]
Number of days from base date to date of settlement is =
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.
Exercise
1.
Calculate Average Due date from the following information:
Date of the bill
Term
August 10, 2010
3 months
October 23, 2010
60 days
December 4, 2010
2 months
January 14, 2011
60 days
March 08, 2011
2 months
(Hints: Average due date = January 19, 2011.)
© The Institute of Chartered Accountants of India
Amount
`
6,000
5,000
4,000
2,000
3,000
Average Due Date and Account Current
2.
7.11
Hari owes Ram ` 2,000 on 1st April, 2011. From 1st April, 2011 to 30th June, 2011 the following further
transactions took place between Hari and Ram:
April 10 Hari buys goods from Ram for ` 5,000
May 16 Hari receives cash loan of ` 10,000 from Ram
June 9
Hari buys goods from Ram for ` 3,000
Hari pays the whole amount, together with interest @ 15% per annum, to Ram on 30th June, 2011.
Calculate the interest payable on 30th June, 2011 by the average due-date method.
(Hints: Average due date =6th May, 2011; Interest= ` 452 (approx.))
3.
Mr. Green and Mr. Red had the following mutual dealings and desire to settle their account on the
average due date:
Purchases by Green from Red:
Rs.
6th
January, 2011
6,000
2nd
February, 2011
2,800
31st March, 2011
2,000
Sales by Green to Red:
6th January, 2011
6,600
9th
2,400
March, 2011
20th March, 2011
500
You are asked to ascertain the average due date.
(Hints: On 20th February, 2011, Green has to pay Red ` 1,300 to settle the account)
© The Institute of Chartered Accountants of India
7.12
Accounting
UNIT-2 : ACCOUNT CURRENT
BASIC CONCEPTS
Account
Current
 When interest calculation becomes an integral part of the account.
The account maintained is called “Account Current”.
Some examples where it is maintained are:
•
Frequent transactions between two parties.
•
Goods sent on consignment
•
Frequent transactions between a banker and his customers
 There are three ways of preparing an Account Current :
•
With the help of interest tables
•
By means of products
•
By means of products of balances
Question 1
On 1st January, 2011 Suri’s account in Puri’s ledger showed a debit balance of ` 2,500. The
following transactions took place between Puri and Suri during the quarter ended 31st March, 2011:
2011
`
Jan 11
Puri sold goods to Suri
3,000
Jan 24
Puri received a promissory note from Suri at 3 months date
2,500
Feb 01
Suri sold goods to Puri
5,000
Feb 04
Puri sold goods to Suri
4,100
Feb 07
Suri returned goods to Puri
March 01
Suri sold goods to Puri
2,800
Mar 18
Puri sold goods to Suri
4,600
Mar 23
Suri sold goods to Puri
2,000
500
Accounts were settled on 31st March, 2011 by means of a cheque. Prepare an Account
Current to be submitted by Puri to Suri as on 31st March, 2011, taking interest into account
@ 10% per annum. Calculate interest to the nearest rupee.
© The Institute of Chartered Accountants of India
In the books of Puri
Suri in Account Current with Puri
(interest to 31st march,2011@10%p.a.)
Date
Due Date
Days
Products
Jan.1
To Balance b/d
Jan. 1
2,500
90
2,25,000
Jan. 11
To Sales
Jan 11
3,000
79
Feb. 4
To Sales
Feb. 4
4,100
Mar. 18
To Sales
Mar. 18
4,600
Mar. 31
To Interest
2011
Particulars
Due Date
Jan.24
By B/R
April 27
2,37,000
Feb. 1
By Purchases
55
2,25,500
Feb. 7
13
59,800
Calculation of interest:
3,98,800 10
= ` 109
×
365
100
© The Institute of Chartered Accountants of India
109
14,309
Date
Days
Products
2,500
(27)
(67,500)
Feb. 1
5,000
58
2,90,000
By Sales Returns
Feb. 7
500
52
26,000
Mar. 1
By Purchases
Mar.1
2,800
30
84,000
Mar. 23
By Purchases
Mar. 23
2,000
8
16,000
Mar. 31
By Balance of
Products
Mar. 31
By Bank
2011
`
Total
Interest =
Amount
7,47,300
Amount
`
3,98,800
1,509
14,309
7,47,300
Average Due Date and Account Current 7.13
Particulars
7.14
Accounting
Question 2
The following are the transactions that took place between G and H during the period from
1st October, 2010 to 31st March, 2011:
2010
`
Oct.1
Balance due to G by H
3,000
Oct 18
Goods sold by G to H
2,500
Nov. 16
Goods sold by H to G (invoice dated November, 26)
4,000
Dec.7
Goods sold by H to G (invoice dated December, 17)
3,500
2011
`
Jan. 3
Promissory note given by G to H, at three months
5,000
Feb. 4
Cash paid by G to H
1,000
Mar. 21
Goods sold by G to H
4,300
Mar.28
Goods sold by H to G (invoice dated April, 8)
2,700
Draw up an Account Current up to March 31st, 2011 to be rendered by G to H, charging interest at
10% per annum. Interest is to be calculated to the nearest rupee.
© The Institute of Chartered Accountants of India
Answer
Date
Mar
21
Mar
31
Mar. To Sales
21
Mar 31 To Interest
Interest for the period =
(6)
55
1,000
10
4,300
No., of days
till 31.3.11
182
164
55,000 Mar 31 Mar 31 By Balance of
product
43,000
By Balance c/d
50
© The Institute of Chartered Accountants of India
Amt.
Product
`
`
125
4,000
5,00,000
104
3,500
3,64,000
(8)
2,700
(21,600)
1,81,600
5,650
-
15,850 10,24,000
1,81,600 x 10 x 1
= ` 50 (approx.)
100 x 365
No. of days
till 31.3.11
15,850 10,24,000
Average Due Date and Account Current 7.15
Due
Particulars
date
2010 2010
Oct 1, Oct 1, To Balance
b/d
Oct
Oct 18 To Sales
18,
2011 2011
Jan 3 Apr 6 To Bills
payable
Feb 4 Feb 4 To Cash
In the books of G
H in Account Current with G
(interest to 31st march,2011@10%p.a.)
Amt.
Product Date Due
Particulars
date
`
` 2010 2010
3,000 5,46,000 Nov
Nov 26 By Purchases
16
2,500 4,10,000 Dec 7 Dec. By Purchases
17
2011 2011
5,000 (30,000) Mar 28 Apr 8 By Purchases
7.16
Accounting
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 by means of product of balances method.
Answer
Roshan’s Current Account with Partnership firm (as on 30.9.2012)
Date
Particulars
Dr
Cr
Days
(` )
Dr.
or
Cr.
Dr
Product
(` )
75,000
Dr.
13
9,75,000
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.
(` )
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
(` )
75,000
1,38,000
97,000
22,000
Cr
Product
(` )
9,45,000
23,457
1,83,457
1,83,457
24,25,000
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)
© The Institute of Chartered Accountants of India
9,45,000
Average Due Date and Account Current
7.17
Exercise
1.
From the following particulars prepare an Account Current to be rendered by A to B at 31st
December, reckoning interest @ 10% p.a.
2011
`
2011
`
July 1
Balance owing from B
600
Sept. 01
B accepted A’s Bill at 3 months date 250
July 17
Goods sold to B
50
Oct.22
Goods bought from B
30
Aug. 1
Cash received from B
650
Nov. 12
Goods sold to B
20
Aug. 19
Goods sold to B
700
Dec. 14
Cash received from B
80
Aug. 30
Goods sold to B
40
Sept. 1
Cash received from B
350
(Hints: Interest (67,090 × 0.1 /365) = ` 18.38 and Balance c/d ` 68.38)
2.
Following transactions took place between X and Y during the month of April, 2011:
Date
Particulars
`
1.4.2011
Amount payable by X to Y
10,000
7.4.2011
Received acceptance of X to Y for 2 months
5,000
10.4.2011
Bills receivable (accepted by Y) on 7.2.2011 is honoured on this due date
10,000
10.4.2011
X sold goods to Y (due date 10.5.2011)
15,000
12.4.2011
X received cheque from Y (due date 15.5.2011)
7,500
15.4.2011
Y sold goods to X (due date 15.5.2011)
6,000
20.4.2011
X returned goods sold by Y on 15.4.2011
1,000
20.4.2011
Bill accepted by Y is dishonoured on this due date
5,000
Prepare Y’s account in the books of X for the month of April, 2011.
(Hints: Interest ` 4,17,500 × 18/100 × 1/365 = ` 205.90 and Balance c/d ` 2,294.10)
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