Acc Ch-7 Average Due Date Sa

8/19/2019 Acc Ch-7 Average Due Date Sa

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7Average 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.

(2 Marks, May, 2008) (PCC)

Answer

Average due date =sinstalmentof .No

repaymenttolendingof datethefrommonthsof Sumloanof Date +

= 1.4.2008 +6

)654321( +++++

= 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 datewhen the payment can be made or received without any loss or gain of interest to either party.

Bills Receivable Bills Payable

Date of the Bill Amount ( ̀ ) Tenure inmonths

Date of bill Amount ( ̀ ) Tenure inmonths

1.6.08 9,000 3 29.5.08 6,000 2

© The Institute of Chartered Accountants of India


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Average Due Date 7.2

5.6.08 7,500 3 3.6.08 9,000 3

9.6.08 10,000 1 10.6.08 10,000 2

12.6.08 8,000 2 13.6.08 7,000 2

20.6.08 12,000 3 27.6.08 11,000 1

Holiday intervening in the period 15 th August, 2008, 16 th August, 2008, and 6 th September, 2008.

(4 Marks, November, 2008) (PCC)

Answer

Calculation of Average Due Date (taking base date as 12th July, 2008)

Date Due dateincluding days

of grace

Amount ( ̀ ) No. of Daysfrom July 12

Products ( ̀ ) Remarks

1.6.08 4.9.08 9,000 54 4,86,000 Bills Receivable

5.6.08 8.9.08 7,500 58 4,35,000

9.6.08 12.7.08 10,000 0 0

12.6.08 14.8.08 8,000 33 2,64,000

20.6.08 23.9.08 12,000 73 8,76,000

46,500 20,61,000

29.5.08 1.8.08 6,000 20 1,20,000 Bills Payable

3.6.08 5.9.08 9,000 55 4,95,000

10.6.08 13.8.08 10,000 32 3,20,00013.6.08 14.8.08 7,000 33 2,31,000

27.6.08 30.7.08 11,000 18 1,98,000

43,000 13,64,000

Difference of Products = ` 20,61,000 – ` 13,64,000 = ` 6,97,000

Difference of Amount = ` 46,500 – ` 43,000 = ` 3,500

Average Due Date =Base Date +

Amount of

oductsof

Difference

Pr Difference

=July 12 +

500,3

000,97,6

= 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 Due date changed due to holidays

(iii) B/P of 13.6.08 Due date changed due to holidays



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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 dateDue date Amount ( ̀ ) No. of days from 5.3.09 Product

5.3.2009 5,000 0 0

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 25,79,000

Average due date = Base date +Sumof Product

Sumof Amount

= 5.3.2009 +26,000

25,79,000 = 99 days

The date of the cheque will be 99 days from the base date i.e.12.6.2009. So on

12th June, 2009, all bills will be settled by a single cheque payment.

Question 5

A trader allows his customers, credi t for one week only beyond which he charges interest @

12% per annum. Anil, a customer buys goods as follows:

Date of Sale/Purchase Amount ( ̀ )

January 2, 2009 6,000January 28, 2009 5,500

February 17, 2009 7,000

March 3, 2009 4,700

Anil sett les his account on 31st March, 2009. Calculate the amount of interest payable by Anil

using average due date method. (8 Marks, November, 2009) (IPCC)



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Answer

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

Date of Sale Due date ofpayment

Amount (̀)

No. of days from 9th January, 2009

Product

Jan. 2 Jan. 9 6,000 0 0

Jan. 28 Feb. 4 5,500 26 1,43,000

Feb. 17 Feb. 24 7,000 46 3,22,000

March 3 March 10 4,700 60 2,82,000

23,200 7,47,000

Average Due date = Base date +amountof Sum

oductPr of Sum

= 9th January, 2009 +200,23

000,47,7

= 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

= ` 23,20049 12

× = 373.74365 100

× `

Question 6

Swaminathan owed to Subramanium the following sums :

` 5,000 on 20 th January, 2009

` 8,000 on 3rd March, 2009

` 6,000 on 5 th April, 2009

` 11,000 on 30 th April, 2009

Ascertain the average due date. (2 Marks, May, 2010) (IPCC)

Answer

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

Due Date Amount `

No. of days from 20 th January

Product

20th January 5,000 0 0



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7.5 Accounting

3rd March 8,000 42 3,36,000

5th April 6,000 75 4,50,000

30th April 11,000 100 11,00,000

30,000 18,86,000

Average due date = 20th January + AmountTotal

ProductTotal

= 20th January +30,000

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 Amount ( ̀ ) Usance of Bill

29th January, 2009 5,000 1 month

20 th March, 2009 4,000 2 months

12 th July, 2009 7,000 1 month

10 th August, 2009 6,000 2 months

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

Calculation of Average Due Date

(Taking 3rd March, 2009 as base date)

Date of bill 2009 Term Due date

2009

Amount No. of days

from the basedate i.e. 3rd

March,2009

Product

( ̀ ) ( ̀ ) ( ̀ )

29th

January 1 month 3rd

March 5,000 0 020th March 2 months 23rd May 4,000 81 3,24,000

12th July 1month 14th Aug. 7,000 164 11,48,000

10th August 2 months 13th Oct. 6,000 224 13,44,000

22,000 28,16,000



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Average due date = Base date + Days equal toSum of Products

Sum of Amounts

= 3rd March, 2009 +28,16,000

22,000

= 3rd March, 2009 + 128 days

= 9th July, 2009

Working Note:

1. Bill dated 29th January, 2009 has the maturity period of one month, but there is nocorresponding 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 3days 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 prof its and losses equally. A has withdrawn thefollowing sum during the half year ending 30 th June 2010:

Date Amount

`January 15 5,000

February 10 4,000

Apri l 5 8,000

May 20 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 2010.

(4 Marks, May, 2011) (IPCC)

Answer

Calculation of Average due date

(Base Date 15th Jan, 2010)

Date Amount

`

No. of days Product

`

January 15 5,000 0 0



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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 33,80,000

Average due date = Base date +Total product

daysTotal amount

×

= 15th Jan +33,80,000

36,000 days

= 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%:

= ` 36,00072 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 Amount ( ̀ )

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

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 hehas 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.



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Answer

Calculation of Average Due Date taking base date as 19.06.2010

Date of Bill Period Maturitydate

No. of days from thebase date

Amount

( ̀ )

Products

09.03.2010 4 months 12.07.2010 23 4,000 92,000

16.03.2010 3 months 19.06.2010 0 5,000 0

07.04.2010 5 months 10.09.2010 83 6,000 4,98,000

18.05.2010 3 months 21.08.2010 63 5,000 3,15,000

20,000 9,05,000

Average due date = Base date + Total of productTotal of amount

= 19.06.2010 +9,05,000

20,000= 45 days (approx.)

= 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 Amount( ̀ ) Tenure of Bill

12 th May 44,000 3 months

10 th June 45,000 4 months

1st July 14,000 1 month

19th July 17,000 2 months

Find out the average due date on which payment may be made in one single amount by M/sMarble & 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)



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7.9 Accounting

Answer


(Taking 4th August as the base date)

Date of bill Term Due date Amount

`

No. of days fromthe base date i.e.

4th August

Product

12th May 3 months 14th August 44,000 10 4,40,000

10th June 4 months 13th October 45,000 70 31,50,000

1st July 1 month 4th August 14,000 0 0

19th July 2 months 23th September 17,000 50 8,50,000

1,20,000 44,40,000

Average due date=Base date+ Days equal toTotal of products

Total amount

= 4th August +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 15 th March, 2012

` 12,000 due on 5 th April, 2012

` 30,000 due on 25 th April, 2012

` 20,000 due on 11 June, 2012

He desires to make the full payment on 30 th 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 basedate i.e. 15 th March, 2012

Product

`

15th March, 2012 7,000 0 0

5th April, 2012 12,000 21 2,52,000

25th April, 2012 30,000 41 12,30,000



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11th June 2012 20,000 88 17,60,000

69,000 32,42,000

Average due date = Base date + Days equal toamountTotal

productsof Total

= 15th March, 2012 +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.

(4 Marks, November 2013) (IPCC)

Answer


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 Product

` `

9.7.13 7,200 0 0

14.8.13 12,200 36 4,39,200

19,400 4,39,200



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7.11 Accounting

Computation of products for Thin’s payments (Base date = 9.7.13)

Due Date Amount No. of days from base date to duedate

Product

` `

15.7.13 18,000 6 1,08,000

31.8.13 16,500 53 8,74,500

34,500 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] 15,100

Number of days from base date to date of settlement is =15,100

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

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 mayoccur 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-evendate 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



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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

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 fromBase date

Product

`

26.05.2014 05.06.2014 12,000 0 0

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 16,43,00017.09.2014 27.09.2014 13,500 114 15,39,000

85,000 61,51,000

Average due date = 5.6.14 +61,51,000

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

Interest if settlement is done on 30.9.14

85,000 x 12% x365

45 =` 1,258 (approx.)

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.



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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 oftransaction 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 iscustomarily 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)

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 onvarious 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 on01-07-2012. 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 97,00009-09-2012 11,000

Show Roshan's A/c in the ledger of the firm. Interest is to be calculated at 10% on debitbalance and 8% on credit balance. You are required to prepare current account as on 30th

September, 2012. (4 Marks, November 2013) (IPCC)



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Answer

Roshan’s Current Account with Partnership firm (as on 30.9.2012)

Date Particulars Dr

( ̀ )

Cr

( ̀ )

Balance

( ̀ )

Dr.orCr.

Days Dr Product

( ̀ )

CrProduct

( ̀ )

01.07.12 To Bal b/d 75,000 75,000 Dr. 13 9,75,000

14.07.12 By Cash A/c 1,38,000 63,000 Cr. 15 9,45,000

29.07.12 To Self 97,000 34,000 Dr. 20 6,80,000

18.08.12 By Cash A/c 22,000 12,000 Dr. 22 2,64,000

09.09.12 To Self 11,000 23,000 Dr. 22 5,06,00030.09.12 To Interest A/c 457 23,457 Dr.

30.09.12 By Bal. c/d 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 Balance due from Siva 750

15 th August Sold goods to Siva 1250

20 th August Goods returned by Siva 200

22 nd Sep Siva paid by cheque 800

15 th

Oct Received cash from Siva 500(4 Marks, IPCC November, 2014)

∗ ‘Current Account’ to be read as ‘Account Current’



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7.15 Accounting

Answer

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

Dr. Cr.

` Days Product( ̀ )

` Days Product( ̀ )

01.07.14 To Bal. b/d 750 123 92,250 20.08.14 By SalesReturns

200 72 14,400

15.8.14 To Sales 1,250 77 96,250 22.09.14 By Bank 800 39 31,200

31.10.14 To Interest 18.48 15.10.14 By Cash 500 16 8,000

By Balance

of Products

1,34,900

_____ ______ 31.10.14 By Bal. c/d 518.48 ______

2018.48 1,88,500 2018.48 1,88,500

Interest =` 1,34,900 x365

1

100

5× =` 18.48

Acc Ch-7 Average Due Date Sa

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