Full Text Transcript
Accounting
7
A D D A C
VERAGE UE ATE AND CCOUNT URRENT
Unit-1 : AVERAGE DUE DATE
BASIC CONCEPTS AND STEPS TO SOLVE THE PROBLEMS
(cid:190) Average Due Date is one on which the net amount payable can be settled without causing loss
of interest either to the borrower or the lender.
(cid:190) When the amount is lent in various instalments then average due date can be calculated as:
Total of [Amount ×No. of days from
Average due date = Base date ± base date to due date]
Total amounts
(cid:190) 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.
(cid:190) Average due date in a case where the amount is lent in one instalment and repayment is done
in various instalments will be:
Sum of days/months/Years from the date
of lending to the date of repayment of
Average due date = Date of Loan +each instalment
Number of instalments
Question 1
State with reasons, whether the following statements are true or false:
(a) If payment is made on the average due date, it results in loss of interest to creditors.
(b) Average due date is the median average of several due dates for payments.
(c) In the calculation of average due date, only the due date of first transaction must be taken as
the base date.
Answer
(a) False- Average due date is ‘no loss no gain’ date to either party. i.e. neither the debtor nor
the creditor stands to lose or gain anything by way of interest.
(b) False- Average due date is equated date for several due dates of payments.
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7.1
Accounting
(c) False- While calculating the average due date, any transaction date may be taken as the
base date.
Question 2
E owes to F the following amounts:
Rs. 5,000 due on 10th March, 2011
Rs. 18,000 due on 2nd April, 2011
Rs. 60,000 due on 30th April, 2011
Rs. 2,000 due on 10th June, 2011
He desires to make the full payment on 30th June, 2011 with interest at 10% per annum from the
average due date. Find out the average due date and the amount of interest. (May, 1999)
Answer
Calculation of Average Due Date
Taking 10th March, 2011 as the base date.
No. of days from the base
Due date Amount Product
date i.e. 10th March, 2011
2011 Rs. Rs.
10th March 5,000 0 0
2nd April 18,000 23 4,14,000
30th April 60,000 51 30,60,000
10th June 2,000 92 1,84,000
85,000 36,58,000
Total of products
Average due date=Base date+ Days equal to
Totalamount
Rs. 36,58,000
= 10th March +
Rs. 85,000
i.e. 43 days (approx.) =22nd April, 2011
Interest amount: Interest can be calculated on Rs. 85,000 from 22nd April, 2011 to 30th June,
2011 at 10% p.a. i.e. interest on Rs. 85,000 for 70 days at 10%.
=Rs. 85,000 x 10/100 x 70/365
=Rs. 1,630 (approx.)
© The Institute of Chartered Accountants of India
7.2
Average Due Date and Account Current
Question 3
Calculate average due date from the following informations:
Date of bill Term Amount (Rs.)
1st March, 2011 2 months 4,000
10th March, 2011 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
(May, 1999 & November, 2002)
Answer
Calculation of Average Due Date
(Taking 4th May, 2011 as the base date)
Date of bill Term Due date Amount No. of days from Product
Rs. the base date Rs.
i.e. May 4, 2011
2011 2011
1st March 2 months 4th May 4,000 0 0
10th March 3 months 13th June 3,000 40 1,20,000
5th April 2 months 8th June 2,000 35 70,000
20th April 1 month 23rd May 3,750 19 71,250
10th May 2 months 13th July 5,000 70 3,50,000
17,750 6,11,250
Total of products
Average due date=Base date+ Days equal to
Totalamount
Rs. 6,11,250
= 4th May, 2011 +
17,750
i.e. 34 days (approx.) = 7th June, 2011
Question 4
‘A’ lent Rs. 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. (May, 1999, November, 2002 & November, 2003)
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Accounting
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.
36
5th payment is made after months from the date of loan.
120
Average due date =
Sum of months from 1st January, 2011 to the date of each installment
Date of loan+
Number of installments
120 months
=1st January, 2011 +
5
=1st January, 2011+ 24 months
=1st January, 2013
Interest =Rs. 25,000 x 10/100 x 2 years
=Rs. 5,000
Question 5
Calculate average due date from the following information:
Sum of months from 1st January, 2007 to the date of Term Amount (Rs.)
each installment
Date of bill
16th August, 2010 3 months 3,000
20th October, 2010 60 days 2,500
14thDecember, 2010 2 months 2,000
24th January, 2011 60 days 1,000
06th March, 2011 2 months 1,500
(November, 2004)
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Average Due Date and Account Current
Answer
Calculation of Average Due Date
(Taking November 19, 2010 as the base date)
Date of bill Term Due date Amount No. of days Product (no.
(including 3 Rs. from the base of days x
grace days) 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
24th January, 2011 60 days March 27, 2011 1,000 129 1,29,000
06th March, 2011 2 months May 09, 2011 1,500 172 2,58,000
10,000 6,49,500
Total of products
Average due date=Base date+ Days equal to
Totalamount
6,49,500
= November 19, 2010 +
10,000
= November 19, 2010 + 65 days (approx.)
= January 23, 2011
Question 6
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 Amount (Rs.)
January 2, 2009 6,000
January 28, 2009 5,500
February 17, 2009 7,000
March 3, 2009 4,700
Anil settles his account on 31st March, 2009. Calculate the amount of interest payable by Anil
using average due date method. (November, 2009)
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Accounting
Answer
Let us assume 9th January, 2009 to be the base date:
Date of Due date of Amount No. of days from 9th Product
Sale payment (Rs.) January, 2009
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
Sum of Product
Average Due date = Base date +
Sumofamount
7,47,000
= 9th January, 2009 + =32days
23,200
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 Rs.23,200 for 49 days @ 12% per annum
49 12
= Rs.23,200 × × =Rs.373.74
365 100
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
20th March, 2009 4,000 2 months
12th July, 2009 7,000 1 month
10th August, 2009 6,000 2 months
(November, 2010)
© The Institute of Chartered Accountants of India
7.6
Average Due Date and Account Current
Answer
Calculation of Average Due Date
(Taking 3rd March, 2009 as base date)
Date of bill Term Due date Amount No. of days Product
2009 2009 from the base
date i.e. 3rd
March,2009
(`) (`) (`)
29th January 1 month 3rd March1 5,000 0 0
20th March 2 months 23rd May 4,000 81 3,24,000
12th July 1month 14th Aug.2 7,000 164 11,48,000
10th August 2 months 13th Oct. 6,000 224 13,44,000
22,000 28,16,000
Sum of Products
Average due date = Base date + Days equal to
Sum of Amounts
28,16,000
= 3rd March, 2009 +
22,000
= 3rd March, 2009 + 128 days
= 9th July, 2009
EXERCISES
1. Calculate Average Due date from the following information:
Date of the bill Term Amount
Rs.
August 10, 2010 3 months 6,000
October 23, 2010 60 days 5,000
December 4, 2010 2 months 4,000
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.
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Accounting
January 14, 2011 60 days 2,000
March 08, 2011 2 months 3,000
(Hints: Average due date = January 19, 2011.)
2. Hari owes Ram Rs. 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 Rs. 5,000
May 16 Hari receives cash loan of Rs. 10,000 from Ram
June 9 Hari buys goods from Ram for Rs. 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= Rs. 459 (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 March, 2011 2,400
20th March, 2011 500
You are asked to ascertain the average due date.
(Hints: On 20th February, 2011, Green has to pay Red Rs. 1,300 to settle the account)
© The Institute of Chartered Accountants of India
7.8
Average Due Date and Account Current
Unit-2 : ACCOUNT CURRENT
BASIC CONCEPTS
(cid:190) 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
(cid:190) 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 Rs. 2,500. The
following transactions took place between Puri and Suri during the quarter ended 31st March, 2011:
2011 Rs.
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 500
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
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
7.9
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© The Institute of Chartered Accountants of India
Average Due Date and Account Current
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 Rs.
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 Rs.
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
7.11
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© The Institute of Chartered Accountants of India
Average Due Date and Account Current
EXERCISES
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 Rs. 2011 Rs.
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) = Rs.18.38 and Balance c/d Rs. 68.38)
2. Following transactions took place between X and Y during the month of April, 2011:
Date Particulars Rs.
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 Rs.4,17,500 × 18/100 × 1/365 = Rs. 205.90 and Balance c/d Rs. 2,294.10)
© The Institute of Chartered Accountants of India
7.13