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Average Due Date CA Foundation Notes

Average Due Date – CA Foundation, CPT notes, PDF

This article is about Average Due Date for CA foundation CPT students. we also provide PDF file at the end.

average due date ca foundation notes

average due date ca foundation notes

What we will study in this chapter: We will study how to calculate average due date and its use for interest calculation.

INTRODUCTION

Average due date is the weighted average of given any number of dates with equal or unequal amounts. It is a single equivalent date for those different dates, hence anything (like interest) to be measured from those respective dates can be alternatively measured from this average due date.

If a party has to pay different amounts due on different dates to the same party then if they want to settle, such total amount on the particular date without loosing or gaining anything by way of interest then such a date is called as the Average due date. This amount due may be on account of Bill of Exchange, Loans or any other transactions.

19.1   WHAT IS DUE DATE?

A date on which a transaction (like sale, purchase, loan instalment) or bills/promissory notes etc. falls due for settlement (i.e. due for receipt or payment) is known as due date.

19.2   HOW IS DUE DATE CALCULATED?

♦       We get due date by adding the credit/bill period on the relevant date + 3 days of grace if applicable.

♦    Relevant date in case of bills of exchange may be date of bill or date of acceptance, as specified in the terms of the bill, in other cases it will be the date of transaction:

  1. For calculating the due dates of the bill, ‘after date’ means after the date of bill and ‘after sight’/after acceptance means after the date of presenting the bill or the date of accepting the bill.

Date of Bill = Date of Drawing Bill = Date of Signing Bill Date of Sight = Date of Presentation = Date of Acceptance

  1. While calculating due date (also known as date of maturity), 3 days of grace is added only in case of Bills of Exchange or Promissory Note, but not in case of general transactions.

Illustration 19.1: Calculate due date of a 3 months bill dated 10.8.03.

Solution: Due date — 10.8.03 + 3 months + 3 days = 13.11.03 Illustration 19.2: Goods sold on 10.1.04 on 2 months credit.

Solution: Due date =10.1.04 + 2 months = 10.3.04

Remember 3 days of grace are applicable only in case of bills of exchange or promissory notes.

19.3   HOW THE EFFECT OF HOLIDAYS IS TAKEN WHILE ASCERTAINING DUE DATE?

  1. In case of Bills of Exchange & Promissory Notes if the due date falls on a Public Holiday (As per Negotiable Instruments Act) then the due date will be the preceding working day. Sunday is a public holiday.
  2. In case of other Emergency Holidays, subsequent working day will be taken as due date.
  3. In case of transactions other than Bills of Exch. & Promissory Notes the due date can always be taken on working day, subsequent to Public Holiday or Emergency Holiday (or unforeseen holiday).

Effect of holidays on due dates (i.e. what to do if the due date falls on holiday)

Due dale relates toHoliday isDate to be considered as due date
1. Bills of exchange/pro- missory notesa.         Public holiday

b.         Emergency holiday (unscheduled/sudden)

Preceding (previous) working day Subsequent (next) working day
2. Other cases like, sale, purchase, etc.a.         Public holiday

b.         Emergency holiday

Subsequent (next) working day

– do –

Illustration 19.3: A draws a 3 months bill on B on 12.05.2011 calculate its due date.

Solution:

Due date = 12.05.2011 + 3 months + 3 days of grace = 15.08.2011 but because 15.08.2011 is a public holiday the due date will be preceding working day i.e. 14.08.2011.

Presuming it is a holiday like Sunday then due date will be 13,08.2011 the preceding working day.

Illustration 19.4: X draws a 4 months bill on Y on 10.05.2011 calculate its due date if on original due date a sudden holiday is declared.

Solution:

Due date = 10.05.2011 + 4 months + 3 days of grace = 13.09.2011 but because on 13.09.2011 a sudden holiday is declared, the due date will be next working day i.e. 14.09.2011. Presuming it is a holiday like Sunday then due date will be 15.09.2011 the next working day.

Illustration 19.5: Ram sales goods on 2 months credit to Shy am on 26.11.2011 calculate its due date.

Solution: Due date = 26.11.2011 + 2 months = 26.01.2012 but because 26.01.2012 is a public holiday the due dale will be next working day i.e. 27.01.2012.

Presuming it is a holiday like Sunday then due date will be 28.01.2012 the next working day.

Illustration 19.6: Irfan sales goods on 60 days credit to John on 10.05.2011 calculate its due date if on original due date a sudden holiday is declared.

Solution:

Due date = 10.05.2011 + 60 days = 09.07.2011 but because on 09.07.2011 a sudden holiday is declared, the due date will be next working day i.e. 10.07.2011. Presuming it is a holiday like Sunday then due date will bell.07.2011 the next working day.

19.4   WHAT IS AVERAGE DUE DATE & WHEN IT CAN BE USED?

Define Average due date. List out the various instances when average due date can be used. [May, 2014]

Average due date is the weighted average date of different due dates relating to various transactions (debit and/or credit) due between the same parties.

Average due date can be used anywhere, when items of same nature and between same parties are to be represented by a single date for convenience of interest calculation &/or settlement.

Ex: 1. Payments due on different date by a debtor to a creditor. 2. Receivable and payables both due between parties.

  1. Bills receivable and Bills payables falling due on different dates to be settled by a single new bill. 4. Interest on drawings made on different date. 5. Loans repayable in equal periodic instalment. 6. Loans distributed in equal periodic instalment, etc.

19.5   BRIEFLY EXPLAIN THE PROCESS OF CALCULATING AVERAGE DUE DATE

Process of calculating average due date

  1. Find out the due dates of all the bills/transactions if not already given.
  2. Select any one date as the base date preferably the earliest date, although any date even other than due date can be taken. (Answer will be same irrespective of the base date selected)
  3. Calculate the days of difference between each due date and the base date. If the due date is prior to base date then ‘minus’ sign will be marked against the days.

Base date (to) due date = + days Due date -> (to) base date = (-) days

  1. The days [calculated in No.(3) above] should be multiplied with the amounts of respective bills/transactions.
  2. The total (sum), of the products [calculated in (4) above] will be divided by the total of amount of bills/transactions.
  3. The resultant figure in No.(5) above shows that the average due date is so many days away from the base date or if the sign is minus, so many days before the base date.
  4. The days will be added or subtracted (if minus) from the base date to get the Average due date.

Average Due Date of normal trade transaction Illustration 19.7: Find out Average Due Date from the following:

Rs. 6,000/-due on05/02/96
Rs. 3,200/-due on07/04/96
Rs. 5,700/-due on15/07/96
Rs. 7,000/-due on18/09/96

Solution:

Let the base date be 5.2.96

Due DateAmountDay From Base DateProduct (Amt × Days)
5.2.966,00000
7.4.963,200621,98,400
15.7.965,7001619,17,700
18.9.967,00022615,82,000
21,90026,98,100

Average due date = Base date +

=5.2.96 + = 5.2.96 + 123 days = 7th June, 1996

Working of days from Base date to Due date

Due DateFeb (From 5.2)MarchAprilMayJuneJulyAugSeptTotal
7.4.962431762
15.7.96243130313015161
18.9.962431303130313118226

How to check leap year: 1996 ÷ 4 = 499 → It is clear division that means, 1996 is a leap year comprising of 366 days with February of 29 days.

Average Due Date of Bills of exchange

Illustration 19.8: A trader having accepted bills falling due on different dates now desires to have his bills cancelled & to accept a new bill for the whole amount payable on the average due date. Calculate Av. Due date.

Date of BillDate of AcceptanceAmountTerm/Usance of bill
01/03/9903/03/99400.002 months from date bill
06/03/9910/03/99300.003 months from date of Acceptance.
05/04/9910/04/99200.002 months after sight
15/04/9920/04/99325.001 month from date of signing.
10/05/9912/05/99500.0060 days from date of bill.

Solution: Let the base date be 4.5.99

Due dateAmountDays from base dateProduct (amt × days)
4.5.9940000
13.6.993004012,000
13.6.99200408,000
18.5.99325144,550
12.7.995006934,500
1,72559,050

Average due date = Base date +

=4.5.99 + =4.5.99 +34.23 days =7th June 99

Working of days from Base date to Due date

Due DateMay (From 4.5)JuneJulyTotal
13.62113 –40
13.6271340
18.51414
12.727301269

19.6 EXPLAIN CALCULATION OF AVERAGE DUE DATE WHEN DEBIT & CREDIT BOTH BALANCES ARE THERE

Calculation of Average Due Date will be same as studied in earlier section. But here there are debit (receivable) & credit (payable) both balances which are opposite to each other, hence while calculating sum of amount the same will get netted and similarly their products will also be debit & credit and hence will also get netted.

Average Due Date when debit & credit both balances are there

Illustration 19.9: Two traders X & Y buy goods from one another each allowing the other 1 month credit. At the end of 3 months the details are as follows: calculate the date upon which the balance should be paid so that no interest is due to either X or Y.

Goods sold by X to Y -> i) 18/04/96 Rs. 60. ii) 15/05/96 Rs. 70, iii) 16/06/96? 80.

Goods sold by Y to X -> i) 23/03/96 Rs. 52, ii) 24/05/96 Rs. 50.

Solution:

Let base date be 23.4.96 (student can take any other date as base date, the ultimate answer will be same)

Due DateAmountDays From Base Date 23.4.1996Product
X to receive from Y
18.5.9660251,500
15.6.9670533,710
16.7.9680846.720
21011,930
X to pay to Y
23.4.965200
24.6.9650623.100
1023,100
X to receive from Y (Net)1088,830

Therefore,

Average due date = Base date +

= 23.4 + = 23.4.96 + 81.76 – 23.4. + 82 days = 14h July, 1996

Therefore 14th July is the average due date.

Note: Due date of each transaction is calculated by adding credit period of one month. These are not bills of exchange/ promissory notes, hence days of grace will not be added.

19.7 EXPLAIN SIMPLE CALCULATION OF AVERAGE DUE DATE AND WHEN IT CAN BE DONE

Calculation of Average Due Date where amount is lent in Single Instalment & repayment is made in number of equal instalments, can be made as follows: Amount of various instalments must be same.

Average Due Date

= Date of lending +

Note: If time gap between instalments is given in years then use years, if given in months use months otherwise use days.

Average Due Date Calculation when amounts are equal

Illustration 19.10: Rs. 10,000 lent (advanced) by Das Bros, to Kumar & Sons, on 1st Jan. 2009, is repayable in 5 equal annual instalments commencing on 1st January, 2010. Find the Average Due Date & Calculate Interest at 5% p.a. which Das Bros, will recover from Kumar & Sons.

Solution:

Average due date = Date of lending +

Average due date = 1.1.2009 + =1.1.2009 + 3 years = 1.1.2012

Interest = 10000 × × 3 (1.1.2009 to 1.1.12) = 1500

Cross verification of formula: Base date 1.1.2009 is taken to prove above formula.

Due Date (1)Amount

(2)

Years

(3)

Product

(4)

1.1.20102,00012,000 × 1
1.1.20112,00022,000 × 2
1.1.20122,00032,000 × 3
1.1.20132,00042,000 × 4
1.1.20142,00052,000 × 5
2,000 × 52,000 (1+2+3+4+5)

Average due date = Date of lending +

Average due date = 1.1.2009 + = 1.1.2009 + = 1.1.2012

19.8 EXPLAIN BASE DATE

In the calculation of average due date, only the due date of the first transaction must be taken as the base date.

True or False (Nov. 2003) [Answer: False. Any date can be taken as base date]

♦    While calculating average due date of may due dates, any date out of the given date or otherwise is selected as base date, so as to give effect of weightage of the amounts of each due date.

♦    If an earliest date is taken as base date then the days (of difference from base date to each due date) will be all positive and consequently the calculations will be simplified. If the last date is taken base date then all days will be negative.

♦    But irrespective of the base date selected, the answer (average due date) of a given date will be always same.

19.9 HOW INTEREST/REBATE CAN BE CALCULATED WITH AVERAGE DUE DATE

If total amount is paid after the ‘Average due date’ then the payer will be liable to pay interest on total amount for the period delay and if the amount is paid before the ‘Average due date’ then the payer will get rebate (discount) for the early payment.

Illustration 19.11: Amit purchased goods from Sumit, the average due date for payment in cash is 10.08.2011 and the total amount due is Rs.50,000.

How much amount should be paid by Amit to Sumit if total payment is made on following dates & interest is to be considered at the rate of 12% p.a. (i) on average due date; (ii) 25th August; (iii) 30th July.

Solution:

Amit to pay to Sumit following amounts.

(i)   If the full amount Rs.50,000 is paid on average due date i.e. 10Λ August then there is neither delay nor an early payment, hence no interest/rebate. Amount to be paid is Rs.50,000

(ii)  If total amount is paid on 25th August then there is delay of 15 days, hence interest will be charged.

Interest = 50,000 ×  ×  = Rs. 246.58

Total payment = 50,000 + 246.58 = 50,246.58

(iii)  If that payment is made on 30lh July then it is an early payment by 11 days.

Hence rebate will be granted Rebate = 50,000 ×-  ×  = Rs. 180.82

Total amount = 50,000 – 180.82 = 49,819.18

19.10   WHY NO INTEREST CHARGED/TAKEN IF SETTLEMENT IS DONE ON AVERAGE DUE DATE

In case of normal trading transactions, the time (credit period) given upto due date is free of interest and the average due date is only equivalent (representative) of these due dates, hence if there is no interest for settlement of individual transaction on respective due date, likewise there will be no interest on settlement on average due date because both are equal.

19.11   HOW AVERAGE DUE DATE IS USED FOR CALCULATING INTEREST ON DRAWINGS

♦    Drawings are made by partner/proprietor on different dates during the year and it is settled (adjusted against capital account) at the end of the year.

♦    Hence interest whenever applicable is calculated from the date of drawing to the year end date on each amount.

♦    When we calculate average due date, it is the average date (equivalent date) of total drawings made hence interest on total amount of drawing is calculated from the average due date to the year end date.

Illustration 19.12:

(CS Dec. 1994) A partner has withdrawn the following sums of money during the half-year ended 30th June, 2011:

Rs.
January 15300
February, 28250
March, 10150
March, 26200
April, 20400
May, 16300
June, 18500

Interest is to be charged at 8% per annum. Find out the average due date and calculate the amount of interest to be debited to the partner.

Solution:

Due date (date of drawing)Amount (of drawing)Day from base date (15.1.2011) to due dateProduct

(2×3)

(1)(2)(3)(4)
January 15, 201130000
February 2825016+284411,000
March 1015016+28+10548,100
March 2620016+28+267014,000
April 2040016+28+31+209538,000
May 1630016+28+31+30+1612136,300
June 1850016+28+31+30+31+1815477,000
2,1001,84,400

Average due date = 15.1.2011 + (1,84,400 ÷ 2,100)

= 15.1.2011 +88 days

= 13th April, 2011

Average due date is the representative date of all the due dates. That means we can say that drawing Rs. 2100 is made on 13.4.2011.

Interest on drawings is calculated from the date of drawing to the end of period.

Here interest will be calculated from 13.4.2011 to 30.6.2011 =78 days

∴ Interest = 2100 ×  ×  = Rs. 35.90 say Rs. 36/-

Note: Even if we calculate individually on each drawing amount, from the date of drawing to 30.6.1994, the total interest will be Rs. 35.90 only.

19.12      HOW SIMPLE INTEREST CAN BE CALCULATED WHEN LOAN IS REPAID ON DIFFERENT DATES

♦    Calculate the average due date of loan instalments repaid. Simple interest will be from the date of lending (granting) to the average due date on the total amount of loan.

♦    Note: In normal cases the interest is by compounding i.e. interest on each due date is added to loan and amount repaid is deducted, then on the remaining balance this process is repeated on next due date. Such compounded interest cannot be calculated by this average date concept.

Illustration 19.13: Rs. 50,000 lent (advanced) by Ambani Bros, to Tata Sons, on 1st Jan. 2011, is repayable in 5 equal annual instalments commencing on 1st January, 2012. Find the Average Due Date & Calculate Interest payable at 15% p.a.

Solution: Average due date = Date of lending +

Average due date = 1.1.2011 +  =1.1.2011 + 3 years = 1.1.2014

Interest = 50,000 × × 3 (1.1.2011 to 1.1.2014) = 22,500. This is simple interest.

Illustration 19.14: Mr. A lends Rs. 25,000 to Mr. B on 1st Jan., 2000. Calculate the average due date and interest, if interest @18% p.a. to be charged by A in each of the following alternative cases:

  1. If the amount is repayable in 5 equal annual instalments commencing from 1st January, 2001.
  2. If the amount is repayable in 5 half yearly equal instalments commencing from 1st January, 2001.
  3. If the amount is repayable in three equal instalments at an interval of two years commencing from 30th June, 2002.
  4. If the amount is repayable in 5 equal instalments as under:-1(01.01.2001); 11(1.7.2001); 111(1.7.2002); IV(01.01.2003); V (01.01.2004)

Solution: Period is in years or months, from the date of lending (i.e. 1.1.2000) to the due date of instalment.

Case (a)

Average Due Date = Date of Lending +

= 01.01.2000 +

= 01.01.2000 + 3 years = 1st Jan, 2003

Interest = Rs. 25,000 ÷ 3 × = Rs. 13,500

Case (b)

Average Due Date = Date of Lending +

= 01.01.2000 + = 01.01.2000 + months

= 01.01.2000 + 24 Months = 1st Jan, 2002

Interest = Rs. 25,000 × × = Rs.9,000

Case (c)

Average Due Date = Date of Lending +

= 01.01.2000 +  = 01.01.2000 +4.5 years

= 1st July, 2004

Interest = Rs. 25,000 × 4.5 × = Rs. 20,250

Case (d)

Average Due Date Date of Lending +

= 01.01.2000 + = 01.01.2000 +28.8 months

(28.8 month means 28 month complete and .8 portion of 29lh month i.e. 31× .8 = 25 days) = 26th May, 2002

Interest = Rs. 25,000 ×  × = Rs.10,800

19.13 HOWTO DECIDE ABOUT TAKING 365 DAYS OR 366 DAYS OR HOWTO DECIDE WHETHER FEBRUARY HAS 28 DAYS OR 29 DAYS?

♦ The year of which February is involved in our calculation should be divided by 4. If it is perfectly divided then the year is a leap year having February of 29 days and year contains 366 days. Otherwise i.e. if the year divided by 4 gives result in fraction then the February is of 28 days and year is of 365 days.

Illustration 19.15:

(i) year 2003 → 2003/4 = 500.75 thus it is non leap year with February 28 days

(ii) year 2004 → 2004/4 = 501 thus it is a leap year with February of 29 days and year contains 366 days.

(iii) If the period under consideration is 1.4.2003 to 31.3.2004 it has February of 2004 hence year will have 366 days.

EXAM PROBLEMS WITH SOLUTIONS FOR SELF-STUDY

Average Due Date from due dates: Simple

Problem No. 1: [Nov. 20091

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) Rs. 5,000 due on 5.3.2009

(ii) Rs. 7,000 due on 7.4.2009

(iii) Rs. 6,000 due on 17.7.2009

(iv) Rs. 8,000 due on 14.9.2009

Solution:

Calculation of Average Due Date

Due dateAmount

Rs.

No. of days from 5.3.09Product
5.3.20095,00000
7.4.20097,000332,31,000
17.7.20096,0001348,04,000
14.9.20098,00019315,44,000
26,00025,79,000

Average due date = Base date +

= 5.3.2009 +  = 5.3.2009 + 99 days

The cheque date will be 99 days from the base date i.e. 12.6.2009, all bills will be settled by a single cheque payment.

Average Due Date from due dates : Simple

Problem No. 2: [May 2010]

Swaminathan owed to Subramanium the following sums :

Rs. 5,000 on 20th January, 2009 Rs. 8,000 on 3rd March, 2009 Rs. 6,000 on 5th April, 2009 Rs.l 1,000 on 30th April, 2009 Ascertain the average due date.

Solution:

Calculation of Average Due Date taking 20th January as the base date

Due DateAmount Rs.No. of days from 20th JanuaryProduct
20th January5,00000
3rd March8,000423,36,000
5th April6,000754,50,000
30th April11,00010011,00,000
30,00018,86,000

Average due date = Base date +  = 20th January +

= 20th January, 2009 + 63 days (approx) = 24th March, 2009

Average Due Date & Interest from transactions with due dates

Problem No. 3: (Nov. 1996):

Hari owes Ram Rs.2,000 on 1st April, 1996. From 1st April, 1996 to 30th June, 1996 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, 1996. Calculate the interest payable on 30th June, 1996 by the average due date method.

Solution:

In all transactions, Hari has to pay to Ram. Let base date be 01.04.1996

Due Date

(1)

Amount

(2)

Days from Base Date

(3)

Product (2) × (3)=(4)
1.4.962,00000
10.4.965,000945,000
16.5.9610,000454,50,000
9.6.963,000692,07,000
Total20,0007,02,000

Average due date

= Base Date +

= 1.4.+  = 1.4 + 35 days

= 6.5.96

If total amount is paid on 6th May i.e. on Average due date then there is neither delay nor an early payment, hence, no interest/rebate to be charged/given.

As amount is paid on 30th June that means there is delay of 55 days (6.5.96 to 30.6.96) in payment, hence interest will be charged.

Interest charged = 20,000 × ×  = Rs. 451

Working Notes:

  1. Working of days from base date to due date
Due DateAprilMayJuneTotal
1.4.9600
10.4.9699
16.5.96291645
1.6.962931969
  1. 1st item of 1.4.96 is the Opening balance, i.e. it is the balance of 31.3.96 hence instead of ‘0’ days (-) 1 day can be taken.
  2. Assuming calendar year 1996 (leap year) 366 days taken. Alternatively if you take 1.4.96 to 31.3.97 (non-leap year) then take 365 days.

Calculation of average due date of normal trade transactions.

Problem No. 4: (Dec. 1999):

Vivek sold goods to Yash as follows:

Date of InvoiceRs.
15.5.201140,000
22.5. 201125,000
29.5. 201145,000
05.6. 201132,500
11.6. 201130,000

The payments were to be made two months from the respective dates of the invoices.

Calculate the average due date on which a single payment can be made by Yash to Vivek without loss of interest to either party.

Solution:

Due date = date of invoice + 2 month

(Days of grace are applicable in case of Bills of Exchange/Promissory Note only).

Let base date be 15.7. 2011.

Date of InvoiceDue DateDays from Base DatesAmountProduct
15.5.201115.7.2011040,0000
22.5.201122.7. 2011725,0001,75,000
29.5. 201129.7. 20111445,0006,30,000
05.6. 201105.8.20112132,5006,82,500
11.6.201111.8. 20112730,0008,10,000
1,72,50022,97,500

Average due date

= Base Date +

= 15.7.2011 +

= 15.7. 2011 + 13.31 days (say 13 days) = 28.7. 2011

Average Due Date & Interest from transactions with credit period : Simple

Problem No. 5: [Nov. 2009]

A trader allows his customers credit for one week only beyond which he charges interest@l 2% p.a. Anil, a customer buys goods as follows:

Date of sale/purchaseAmount

Rs.

January 2, 20096,000
January 28, 20095,500
February 17, 20097,000
March 3, 20094,700

Anil settles his account on 31st March, 2009. Calculate the amount of interest payable by Anil using Average Due Date method.

Solution:

Calculation of Average Due Date (Base date: 9.1.2009)

Date of sale/purchaseDue datesNo. of days from base date to the due dateAmount (Rs.)Product (Rs.)
2nd January, 20099th January, 200906,0000
28th January, 20094th February, 2009265,5001,43,000
17th February, 200924th February, 2009467,0003,22,000
3rd March, 200910th March, 2009604,7002,82,000
23,2007,47,000

Average due date = Base date +

 

= 9th January, 2009 +

= 9th January, 2009 + 32 days

= 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

= Rs. 23,200 ×  ×  =Rs. 373.74 Say Rs. 374

Average Due Date & Interest from given due dates : Simple

Problem No. 6: (Nov. 2012)

T owes to K the following amounts:

Rs. 7,000 due on 15th March, 2012 Rs. 12,000 due on 5th April, 2012 Rs. 30,000 due on 25th April, 2012 Rs. 20,000 due on 11th 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.

Solution:

Calculation of Average Due Date taking 15th March, 2012 as the base date

Due dateAmountNo. of days from the base

date Le. 15th March, 2012

Product
15th March, 20127,00000
5th April, 201212,000212,50,000
25th April, 201230,0004112,30,000
11th June 201220,0008817,60,000
69,00032,42,000

Average due date

= Base date + Days equal to

= 15th March, 2012 +

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

Interest amount: Interest can be calculated on Rs. 69,000 from 1st May, 2012 to 30th June, 2012 at 10% p.a. i.e. interest on Rs. 69,000 for 60 days at 10% p.a. =Rs. 69,000 × 10/100 × 60/366 = Rs. 1,131 (approx.) year 2012 will have 366 days.

Average Due Date from Debit (receivable) & Credit (payable) both transactions

Problem No. 7: (Nov. 2013)

The following transaction took place between thick and thin. They desire to settle their account on average due date.

Purchases by Thick from ThinRs.
9th July, 20137,200
14th August, 201312,200

 

Sales by Thick to ThinRs.
15th July, 201318,000
31st August, 201316,500

Calculate average due date and the amount to be paid or received by thick.

Solution:

Let base date be 9.7.2013 (student can take any other date as base date, the ultimate answer will be same)

Particulars & Due DateAmountDays from Base DateProduct
9.7.2013
Thick to receive from Thin
15.7.2013

31.8.2013

18,0006

53

1,08,000
16.5008.74.500
Thick to pay to Thin 9.7.201334,5000

36

9,82,500
14.8.2013. 0
Thick to receive from Thin7,200Net Products4.39.200
(Net)12.2004.39.200
19.4005,43,300
nohiid √s temij j15,100

therefore,

Average due date = Base date +

= 9.7.13 +  = 9.7,13 + 35.98 = 9.7. + 36 days = 14th August, 2013

therefore 14th August, 2013 is the average due date on which Thick to receive Rs.15,100.

Due Date falling on a Public Holiday in case of Promissory Note

Problem No. 8: (May 2007)

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?

Solution:

Maturity date = 12.8.08 + 3 days of grace = 15.8.08

This is public holiday, hence preceding working day i.e. 14th August shall be taken as due date/maturity date.

Calculation of average due date of Bills of Exchange.

Problem No. 9: (Nov. 1997) (Similar in Nov. 2004)

Calculate Average Due date from the following information:

Date of billTermsAmount
August 10, 20103 months6,000
October 23, 201060 days5,000
December 4, 20102 months4,000
January 14, 201160 days2,000
March 8, 20112 months3,000

Solution:

Due date = Date of bill + Period in month/days + 3 days

(Days of grace are applicable in case of Bills of Exchange/Promissory Note only).

Let the base date be 13.11.2010

Due dateAmountDaysProduct
10.8.2010 + 3 months + 3 days = 13.11.20106,00000
23.10.2010      + 60 days + 3 days = 24.12.2010*

4.12.2010        + 2 months + 3 days = 7.2.2011

5.000

4.000

41

86

2.05.000

3.44.000

14.1.2011 + 60 days + 3 days = 18.3.20112,0001252,50,000
8.3.2011 + 2 months + 3 days = 11.5. 20113,0001795,37,000
20,00013,36,000

* Due date comes 25.12 which is a public holiday hence preceding working day is taken.

Sum of the product

Average due date = Base date +  = 13.11.2010+67 days

= 19th January 2011

Average Due Date from the Bills of Exchange

Problem No. 10: (May 2012)

M/s Stairs & Co. draw upon M/s Marble & Co. several bills of exchange due for payment on different dates as under:

Date of BillAmount (Rs.)Tenure of Bill
12th May44,0003 months
10th June45,0004 months
1st July14,0003 month
19th July17,0002 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.

Solution:

Calculation of Products: Base Date = 14th August

Date of bill + Period + Grace days = Due DateDays from Base dateAmountProduct
12th May + 3 month + 3 days = 14th August044,0000
10th June + 4 month + 3 days = 13th October17+30+13 =6045,00027,00,000
1st July + 1 month + 3 days = 4th August-10 = -1014,000-1,40,000
19th July + 2 month + 3 days = 23rd September17 + 23=4017,0006,80,000
1,20,00032,40,000

15th August being national holiday, preceding working day 14th August is taken as due date.

22nd September being emergency holiday, subsequent working day 23rd Sept, is taken as due date.

Average Due Date               = Base date +

= Base date +27 days = 14 August + 17 + 10 = 10th September

Average Due Date from the Bills of exchange

Problem No. 11: (Nov. 2010)

From the following details find out the average due date :

Date of BillAmountUsance of Bill
29th January, 20095,0001 month
20th March, 20094,0002 months
12th July, 20097,0001 month
10th August, 20096,0002 months

Solution:

Calculation of Average Due Date (Taking 3rd March, 2009 as base date)

Date of bill 2009TermDue date 2009AmountNo. of days from the base date Le. 3rd March, 2009Product
29th January1 month3rd March5,00000
20th March2 months23rd May4,000813,24,000
12th July 10th1 month(15th Aug) 14th Aug.7,00016411,48,000
August2 months13th Oct.6,00022413,44,000
22,00028,16,000

Average due date = Base date + Days equal to

3rd March, 2009 +  = 3rd March, 2009 +128 days

= 9th July, 2009

Average Due Date & date of settlement to earn Rs.150 rebate from the Bills payable

Problem No. 12: (Nov.11)

Mr. Black accepted the following bills drawn by Mr. White:

Date of BillPeriodAmount (Rs.)
09-03-20104 months4,000
16-03-20103 months5,000
07-04-20105 months6,000
18-05-20103 months5,000

He wants to pay all the bills on a single date. Interest chargeable is @ 18% p.a. and Mr. Black wants to save Rs. 150 on account of interest payment. Find out the date on which he has to effect the payment to save interest of Rs. 150. Base date to be taken shall be the earliest due date.

Solution:

Calculation of Due date
9 – 03 – 2010 + 4 months + 3 days12 -07-2010
16-03 -2010 + 3 months + 3 days19-06-2010
07 – 04 – 2010 + 5 months + 3 days10-09-2010
18 – 05 – 2010 + 3 months + 3 days21 -08 -2010
Let Base date be 19.06.2010

 

Amount of BillDays from Base date to due dateProduct = Amount × Days
4,0002392,000
5,00000
6,000834,98,000
5,000633,15,000
20,0009,05,000

Average due date

= Base date +

= 19-06-2010 +

= 19-06-2010 + 45.25

= 19 — 06 — 2010 + say 45 days

Average due date = 03 -08 -2010

If the full amount Rs.20,000 is paid on average due date i.e. 3rd August then there is neither delay nor an early payment. If Mr. Black wants to save Rs.150 on account of interest payment, he should make early payment as follows:

Interest = 20,000 × 18%         = 3,600 p.a.

Interest =                          = 300 p.m.

Rs. 150 =  month (15 days) interest

Hence, Mr. Black should pay all bills amounting Rs.20,000 net of rebate Rs.150 on 19-07-2010.

Or 150 = 20,000 × 18% ×  by solving it we get X = 15.20 days i.e. say 15 days.

Average Due Date in case of Bills Receivable & Bills Payable both

Problem No. 13: (Nov. 2008)

‘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 ReceivableBills Payable
Date of the billAmountTenure in monthsDate of the BillAmount

Rs.

Tenure in Months
1.6.089,000329.5.086,0002
5.6.087,50033.6.089,0003
9.6.0810,000110.6.0810,0002
12.6.088,000213.06.087,0002
20.6.0812,000327.6.0811,0001

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

Solution:

Bills ReceivableCalculation of Average Due dateBase Date: 12.7.2008
DateDue dateNo. of Days from base dateAmount (Rs.)Products(Rs.)
01.06.200804.09.2008549,0004,86,000
05.06.200808.09.2008587,5004,35,000
09.06.200812.07.2008010,0000
12.06.200814.08.2008*338,0002,64,000
20.06.200823.09.20087312,0008,76,000
46,50020,61,000

Bills Payable

DateDue dateNo. of Days from base dateAmount(Rs.)Products (Rs.)
29.05.200801.08.2008206,0001,20,000
03.06.200805.09.2008*559,0004,95,000
10.06.200813.08.20083210,0003,20,000
13.06.200814.08.2008*337,0002,31,000
27,06.200830.07.20081811,0001,98,000
43,00013,64,000

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

Difference of Amount = Rs. 46,500 – Rs. 43,000 = Rs. 3,500 receivable

Average Due Date = Base Date +

July 12 +

= July 12 + 199.14 or 199 days = 27th January, 2009

*Note: 16th August & 6th September are not clarified whether public holiday or emergency holiday, hence we have taken all as public holiday and hence due date is taken as preceding working day.

Average Due Date & Interest from the date of Drawings

Problem No.14: (May 2011)

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:

DateAmount
January 155,000
February 104,000
April 58,000
May 2010,000
June 189,000

Interest on drawings is charged @ 1096 per annum. Find out the average due date and calculate the interest on drawings to be charged on 30th June, 2010.

Solution:

Calculation of Average due date

(Base Date 15th January, 2010)

Date of DrawingAmountNo. of Days from Base Date to Due DateProduct

(Rs.)

January 155,00000
February 104,000261,04,000
April 58,000806,40,000
May 2010,00012512,50,000
June 189,00015413,86,000
36,00033,80,000

Average due date = Base date +

= 15th Jan +

= 15th January + 94 days (approx.)

= 19th April, 2010

Average due date of drawings means as if Rs. 36,000 has been withdrawn on 19/4/2010. Interest on Drawing is charged from the date of drawing to the end of period.

Number of days from 19th April, 2010 to 30th June, 2010 = 72 days Hence interest on drawings @ 10% should be charged for 72 days

Interest = Rs. 36,000 ×  ×  = Rs.710

Hence, interest on drawings Rs. 710 will be charged from A on 30th June, 2010.

Average Due Date & Interest in case of equal loan installment

Problem No. 15: (Nov. 2002)

A lent Rs. 25,000 to ‘B’ on 1st January 2000. The amount is repayable in 5 half-yearly installments commencing from 1st January, 2001 . Calculate the average due date and Interest @ 10% per annum.

Solution:

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.

Total –                             120 months

Average Due Date = Date of lending +

= 1.1.2000 +

= 1.1.2000 + 24 months = 1st January, 2002

Interest = 25,000 × 10% × 2 years (24 months) = Rs.5,000

This is the simple alternative calculation of average due date when amounts are equal.

Problem No. 16: (May 2008)

Mr. A advanced Rs. 30,000 to Mr. B on 1.4.2008. The amount is repayable in 6 equal monthly installments commencing from 1.5.2008. Compute the average due date for the loan.

Solution:

Average due date = + date of lending

= 1.4.08 +

= 1.4.08 + 3.5 months = 16th July, 2008

*This article contains all topics about average due date.

For notes on all CA foundation topics, you can visit this article CA foundation note

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