Acc Ch-7 Average Due Date Sa

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)
Answer
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.
Answer
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
The Institute of Chartered Accountants of India
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)
Answer
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
Due date changed due to holidays
(ii)
B/P of 3.6.08
(iii)
B/P of 13.6.08
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)
` 5,000 due on 5.3.2009
(ii)
` 7,000 due on 7.4.2009
(iii) ` 6,000 due on 17.7.2009

(iv) ` 8,000 due on 14.9.2009
(4 Marks, November, 2009) (PCC)
Answer
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)
Average Due Date
7.4
Answer
Let us assume 9th January, 2009 to be the base date:

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
No. of days from 9th

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)
Answer
Calculation of average due date taking 20th January as the base date
Due Date
Amount
`
20th January
5,000
No. of days from 20th

January
0
Product
7.5
Accounting
3rd March
5th April
30th April
Average due date
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

Answer
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
Average Due Date
Average due date
Base date + Days equal to
3rd March, 2009 +
3rd March, 2009 + 128 days
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)
Answer
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.
The word save should be read as earn for better understanding of the requirement of the question.
Average Due Date
7.8
Answer
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
Average due date = Base date +
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)
7.9
Accounting
Answer
(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
Average due date=Base date+ Days equal to

= 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)
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
5th
7,000
12,000
30,000
0
21
41
0
2,52,000
12,30,000
Average Due Date
11th June 2012

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
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.
Answer
Computation of products for Thicks payments
(Taking 9.7.13 as base date)
Due Date
Amount No. of days from base date to due date
`
9.7.13
14.8.13
7,200
12,200
19,400
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
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
Excess of Thins products over Thick [9,82,500-4,39,200]
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)
Answer
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)
Answer
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.
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)
Answer
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?
Answer
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.
Average Due Date
7.14
Answer
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
Balance due from Siva
July
`
750
15th August
Sold goods to Siva
20th August
Goods returned by Siva
200
22nd Sep
Siva paid by cheque
800
15th
Received cash from Siva
500
Oct
1250
(4 Marks, IPCC November, 2014)
Current Account to be read as Account Current
7.15
Accounting
Answer
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

Acc Ch-7 Average Due Date Sa

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7

Average Due Date

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

= 1.4.2008 + 3.5 months = 16th July 2008

The Institute of Chartered Accountants of India

Average Due Date

Due date changed due to holidays

Due date changed due to holidays

Due date changed due to holidays

The Institute of Chartered Accountants of India

` 5,000 due on 5.3.2009

` 7,000 due on 7.4.2009

(iii) ` 6,000 due on 17.7.2009

(4 Marks, November, 2009) (PCC)

No. of days from 5.3.09

The Institute of Chartered Accountants of India

Average Due Date

Let us assume 9th January, 2009 to be the base date:

Average Due date = Base date +

No. of days from 9th

= 9th January 2009 + 32 days

` 5,000 on 20th January, 2009

(2 Marks, May, 2010) (IPCC)

The Institute of Chartered Accountants of India

No. of days from 20th

Average due date

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

(4 Marks, November, 2010) (IPCC)

The Institute of Chartered Accountants of India

Average Due Date

Average due date

Base date + Days equal to

3rd March, 2009 +

3rd March, 2009 + 128 days

9th July, 2009

The Institute of Chartered Accountants of India

= 15th Jan + 94 days (approx.)

The Institute of Chartered Accountants of India

Average Due Date

Average due date = Base date +

No. of days from the

= 3rd August, 2010.

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

The Institute of Chartered Accountants of India

Average due date=Base date+ Days equal to

Amount No. of days from

= 4th August +37 days = 10th September

` 7,000 due on 15th March, 2012

No. of days from the base

The Institute of Chartered Accountants of India

Average Due Date

11th June 2012

= Base date + Days equal to

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

14th August, 2013

Sales by Thick to Thin

15th July, 2013

31st August, 2013

Amount No. of days from base date to due date

The Institute of Chartered Accountants of India

Amount No. of days from base date to due

Excess of Thins products over Thick [9,82,500-4,39,200]

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

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