CA Foundation Accounts|Average Due Date 13.

13. AVERAGE DUE DATE

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 CA Foundation Accounts|Average Due Date 13.2

13. AVERAGE DUE DATE

1. INTRODUCTION
Average due date is a mean date on which a single amount can be paid in lieu of several
payments on different dates. When several bills of exchange are drawn by the drawer on
the drawee, payable on different dates, the drawee should make payments on those
different dates to discharge his liability. Both the parties may feel it inconvenient
to make/receive payments at different dates. As a solution, a mean date is
calculated for a lump sum payment, which may result neither in any loss of
interest to the drawer nor any undue advantage to the drawee.

2.USE OF AVERAGE DUE DATE TECHNIQUE

❖ Calculation of interest on drawings of partners .
❖ Amount lent in one installment and repayable in various installments.
❖ Cancellation of various bills of exchange due on different dates by issuance
of a single bill payable on a single date.
❖ Settlement between parties that have mutual dealings.
❖ Calculation of interest on book debt which is realised piecemeal during
dissolution of partnership.

3. WHERE AMOUNT IS LENT IN VARIOUS INSTALMENTS

Steps for calculation of average due date
❖ Assume any of the due dates as a base date (also called as" Zero date" or" Start date”).
Any date can be taken as base date, but it is better to take first chronological due date
as base date.
❖ Calculate the number of days from the base date to the due date of each transaction
❖ Multiply the number of days so calculated by the corresponding amount of transaction.
The resultant figure is called 'Products'.
❖ Sum up the amount and product columns.
❖ Divide the total of product by the total of amount. The result is the number of days,
❖ Calculate average due date as per the following formula:
Total Product Days
(Average Due Date = Base Date ± )
Total Amount

Concept Question No.1

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 CA Foundation Accounts|Average Due Date 13.3

A sold goods to B as follows :

Date of Invoice Amount (Rs.)
15.5.2007 40,000
22.5.2007 25,000
29.5.2007 45,000
3.6.2007 32,500
09.6.2007 30,000
The payments were to be made two months from the respective date of invoices.Calculate
the average due date on which a single payment can be made by B to A without loss of
interest to either parties.
Solution:
Step 2: Calculate the number of Step 1: Assume any of
days from the base date to the the due dates as a
due date of each transaction. base date

Calculation of Average due Date Base Date: 15.07.2007

Date Due Date No. of Days from base Amount (Rs) Products
date
15.5.2007 15.7.2007 0 40,000 0
22.5.2007 22.7.2007 7 25,000 1,75,000
29.5.2007 29.7.2007 14 45,000 6,30,000
03.6.2007 03.8.2007 19 32,500 6,17,500
09.6.2007 09.8.2007 25 30,000 7,50,000
1,72,500 21,72,500

Step 4: Sum up the amount

and product columns. Step 3: Multiply the
number of days so
Total Product Days
(Average Due Date = Base Date ± ) calculated by the
Total Amount corresponding amount of
transaction
21,72,500
(Average Due Date = 15.07.2007 ± )
1,72,500
Step 5: Calculate
average due date
(Average Due Date = 15.07.2007 + 13 Days)
(Average Due Date = 28.07. 2007)

4.WHERE AMOUNT IS LENT IN ONE INSTALLMENT AND REPAYMENT IS DONE IN VARIOUS

INSTALLMENT
This method is adopted when amount of bill / instalment is equal.

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 CA Foundation Accounts|Average Due Date 13.4

Step 1: Calculate number of days/monthly/years from the date of lending

money to the date of each repayment.
Step 2: Find the total of such days/months/years.
Step 3: The formula for the average due date can be written as under:

(Average Due Date= Date of Loan+

Sum of days/months/Years from the date of lending to the date of repayment of each instalment
)
Number of instalments

Concept Question No.2

X lends Rs 1,00,000 to Y on 1.1.2002. The loan is repayable in 5 equal annual instalments,
commencing from 1.1.2003. Calculate the Average Due Date.
Solution
Step 1: Calculate number of days/monthly/years from the
date of lending money to the date of each repayment.

Calculation of Average Due Date Base Date : 01.01.2002

Date of Payment No. of Years from base date Amount (Rs)
01.01.2003 1 20,000
01.01.2004 2 20,000
01.01.2005 3 20,000
01.01.2006 4 20,000
01.01.2007 5 20,000
Sum of the Year’s Digit= 15 1,00,000

Step 2: Find the total of such days/months/years.

(Average Due Date= Date of Loan+

Sum of Years from the date of lending to the date of repayment of each instalment
)
Number of instalments
15
(Average Due Date = 1.1.2002 + )
5
(Average Due Date = 1.1.2002 + 3 Years)
(Average Due Date = 1.1.2005)

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 CA Foundation Accounts|Average Due Date 13.5

5. AMOUNTS ARE RECEIVABLE AS WELL AS PAYABLE ON DIFFERENT DATES (SETTLEMENT

OF CONTRA ACCOUNTS)
For calculating the average due date, the following steps should be followed

Receivable
Step 1 Select the first due date as the base date.
Step 2 Calculate the number of days from the base date.
Step 3 Multiply the amounts by the number of days (calculated above)

Payables
Step 4 Take the same due date (as above) as the base date.
Step 5 Calculate the number of days from the base date.
Step 6 Multiply the amounts by the number of days (calculated above).
Step 7 Now, add both amounts and products of Receivable and Payables.
Step 8 Find out the balance of amounts and balance of Products column.
Step 9 Divide 'the balance of the products' by 'the balance of the amounts'.
Step 10 The result will give the number of days which is added to the base date and thus,
the average due date is found out.
Balance of Products
(Average Due Date = Base Date ± )
Balance of Amount

Concept Question No.3

Anil Kapoor had the following bills receivable and bills payable against Raj Kapoor.
Calculate the average due date when the payment can be made or received without any
loss of interest to either party.
Note: Holidays intervening in the period: 15 August, 2007, 16th August, 2007 and 6th
September, 2007.
Bills Receivable Bills Payable
Date Amount Tenure Date Amount (Rs) Tenure
(Rs) (months) (months)
01.06.2007 3,000 3 29.05.2007 2,000 2
05.06.2007 2,500 3 03.06.2007 3,000 3
09.06.2007 6,000 1 10.06.2007 6,000 2
12.06.2007 10,000 2 13.06.2007 9,000 2
20.06.2007 15,000 3 27.06.2007 13,000 1
Solution:

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 CA Foundation Accounts|Average Due Date 13.6

Calculation of Due Date of Bills Receivable

1st 2nd 3rd 4th 5th
Date of Drawing 01.06.2007 05.06.2007 09.06.2007 12.06.2007 20.06.2007
Period 3 3 1 2 3
01.09.2007 05.09.2007 09.07.2007 12.08.2007 20.09.2007
Days of grace 3 3 3 3 3
04.09.2007 08.09.2007 12.07.2007 15.08.2007* 23.09.2007
Date of Drawing 29.05.2007 03.06.2007 10.06.2007 13.06.2007 27.06.2007
Period 2 3 2 2 1
29.07.2007 03.09.2007 10.08.2007 13.08.2007 27.07.2007
Days of grace 3 3 3 3 3
Due Date 01.08.2007 06.09.2007* 13.08.2007 16.08.2007* 30.07.2007

Tutorial Note :
After including days of grace, if the maturity date falls on a Public Holiday, the bill is
payable on the preceding Working day. Therefore, the dude ate of 4th B/R will be 14.8.2007;
2nd B/P will be 5.9.2007 and that of 4th B/P will be 14.8.2007.
Step 2: Calculate the number of Step 1: Select the first due
days from the base date to the date as the base date
due date of each transaction.

Bills Receivable Calculation of Average Due Date Base Date : 12.07.2007

Date Due Date No. of Days from base date Amount (Rs) Products
01.06.2007 04.09.2007 54 3,000 1,62,000
05.06.2007 08.09.2007 58 2,500 1,45,000
09.06.2007 12.07.2007 0 6,000 0
12.06.2007 14.08.2007 33 10,000 3,30,000
20.06.2007 23.09.2007 73 15,000 10,95,000
36,500 17,32,000

Step 7: Sum up the amount and

product columns. Step 3: Multiply the number of days so
calculated by the corresponding amount of
transaction

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 CA Foundation Accounts|Average Due Date 13.7

Step 5: Calculate the number of Step 4: Take the same

days from the base date to the due date (as above) as
due date of each transaction. the base date

Bills Payable Calculation of Average Due Date Base Date : 12.07.200

Date Due Date No. of Days from base date Amount (Rs) Products
29.05.2007 01.08.2007 20 2,000 40,000
03.06.2007 05.09.2007 55 3,000 1,65,000
10.06.2007 13.08.2007 32 6,000 1,92,000
13.06.2007 14.08.2007 33 9,000 2,97,000
27.06.2007 30.07.2007 18 13,000 2,34,000
33,000 9,28,000

Step 7: Sum up the Step 6: Multiply the number of days so

amount and product calculated by the corresponding amount
columns. of transaction

Balance of Products = Rs. 17,32,000 – Rs. 9,28,000 = Rs. 8,04,000; Step 8: Find out the
Balance of Amount = Rs. 36,500 – Rs. 33,000 = Rs. 3,500. balance of amounts and
balance of Products
column.
Balance of Products
(Average Due Date = Base Date ± ) Step 9 Divide 'the balance
Balance of Amount of the products' by 'the
balance of the amounts'.
column.
8,04,000
(Average Due Date = 12.07.2007 ± )
3,500

(Average Due Date = 12.07.2007 + 230 days)

Step 10 Find out average due

(Average Due Date = 27.02.2008) date.

6. APLLICATION TO PARTNERSHIP (INTEREST ON PARTNERS' DRAWINGS)

Average due date technique can be used for calculating interest on partners' drawings at
different dates.
For calculating interest the following steps should be followed:

❖ Calculate the average due date in the usual manner.

❖ Find out the difference between the average due date (as computed above) and the
date of closing the books of account.

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 CA Foundation Accounts|Average Due Date 13.8

❖ Calculate interest by applying the following formula:

Number of Months
(Interest = × Rate of Interest × Amount )
12

Concept Question No.4

Gavaskar and Kapil are two partners of a firm. They have drawn the following amounts
from the firm in the year ending 31st March, 2008:
Gavaskar Kapil
Date Rs Date Rs
2007,1st June 500 2007,1st July 500
2007, 31st August 300 2007,1st September 600
2007,1st October 1,000 2008,1st January 800
2008, 31st January 400 2008,1st February 400
Interest @ 6% is charged on all drawings. Calculate interest chargeable under Average
due date system (calculation to be made in months).

Solution:
Calculation of Average Due Date of Gavaskar Base Date : 31.01.2008
Date Months from base date Amount (Rs) Products
01.06.2007 (-) 8 500 (-) 4,000
31.08.2007 (-) 5 300 (-) 1,500
01.10.2007 (-) 4 1,000 (-) 4,000
31.01.2008 0 400 0
2,200 (-) 9,500

Step 1: Calculate
Total Product Days Average Due Date in a
(Average Due Date = Base Date ± ) usual manner.
Total Amount

9500
(Average Due Date = 31.01.2008 ± )
2200

(Average Due Date = 31.01.2008 − 4 months)

Step 2: Find out the difference
(Average Due Date = 01.10.2007) between the average due date (as
computed above) and the date of
closing the books of account.
Number of Months
(Interest = × Rate of Interest × Amount )
12

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CA Foundation Accounts|Average Due Date 13.9

Interest to be charged from 1st Oct. 2007 to 31st March, 2008, i.e., for 6 months
Step 3: Calculate
6 interest by applying
(Interest = × 6% × 2200 = Rs. 66 ) the formula.
12

Calculation of Average Due Date of Kapil Base Date : 31.01.2008

No. of Days from base
Date Amount (Rs) Products
date
01.07.2007 (-) 7 500 (-) 3,500
01.09.2007 (-) 5 600 (-) 3,000
01.01.2008 (-) 1 800 (-) 800
01.02.2008 0 400 0
2,300 (-) 7,300

Total Product Days

(Average Due Date = Base Date ± )
Total Amount

7300
(Average Due Date = 31.01.2008 ± )
2300

(Average Due Date = 31.01.2008 − 3 months)

(Average Due Date = 01.11.2007)

Number of Months
(Interest = × Rate of Interest × Amount )
12

Interest to be charged from 1st Nov. 2007 to 31st March, 2008, i.e., for 5 months
5
(Interest = × 6% × 2300 = Rs. 57.50 )
12

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 CA Foundation Accounts|Average Due Date 13.10

Let’s Get Started….With Class Work

1. The followings are the amounts due on different dates in between the same parties:
Amount Due Date
500 3rd July 2nd August
800 11th September
1,000
Suggest a date on which all the bills may be paid out without any loss of interest to either
party.

2. The following amounts are due to X by Y. Y wants to pay off (a) on 18th March or (b) on 14th July.
Interest rate of 8% p.a. is taken into consideration.
Due Dates `
10th January 500
26th January (Republic Day) 1,000
23rd March 3,000
18th August (Sunday) 4,000
Determine the amount to be paid in (a) and in (b).

3. Calculate Average Due date from the following information:

Date of the bill Term Amount
`
August 10, 2015 3 months 6,000
October 23, 2015 60 days 5,000
December 4, 2015 2 months 4,000
January 14, 2016 60 days 2,000
March 08, 2016 2 months 3,000
(Assume February of 28 days)

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 CA Foundation Accounts|Average Due Date 13.11

4. A trader having accepted the following several bills falling due on different dates, now desires to have
these bills cancelled and to accept a new bill for the whole amount payable on the average due
date :
No. Date of bill Amount Usance of the bill
1 1st March 2016 400 2 months
2 10th March 2016 300 3 months
3 5th April 2016 200 2 months
4 20th April 2016 375 1 month
5 10th May 2016 500 2 months
You are required to find the said average due date.

5. A owes B ` 890 on 1st January, 2015. From January to March, the following further transactions
took place between A and B:
January 16 A buys goods ` 910
February 2 A receives Cash loan ` 750
March 6 A buys goods ` 810
A pays the whole amount on 31st March, 2015 together with interest at 5% per annum. Calculate
the interest by the average due date method.
Due Date Amount No. of days from Jan. 1 Product
2015 `
Jan. 1 890 0 0
Jan. 16 910 15 13,650
Feb. 2 750 32 24,000
March 6 810 64 51,840
3,360 89,490

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 CA Foundation Accounts|Average Due Date 13.12

6. Radheshyam purchased goods from Hariram. The due dates for payment is cash, being as follows:
March 15 ` 400 Due on 18th April
April 21 ` 300 Due on 24th May
April 27 ` 200 Due on 30th June
May 15 250 Due on 18th July
Hariram agreed to draw a Bill for the total amount due on the average due date. Ascertain that
date

7. Two traders X and Y buy goods from one another, each allowing the other one month’s credit. At
the end of 3 months the accounts rendered are as follows:
Goods sold by X to Y Goods sold by Y to X
` `
April 18 60.00 April 23 52.00
May 15 70.00 May 24 50.00
June 16 80.00
Calculate the date upon which the balance should be paid so that no interest is due either to X or
Y.

8. Manoj had the following bills receivables and bills payable against Sohan. Calculate the
average due date, when the payment can be received or made without any loss of interest
Date Bills Receivable Tenure Date Bills Payable Tenure
` `
01/06/2016 3,000 3 month 29/05/2016 2,000 2 month
05/06/2016 2,500 3 month 03/06/2016 3,000 3 month
09/06/2016 6,000 1 month 9/06/2016 6,000 1 month

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 CA Foundation Accounts|Average Due Date 13.13

12/06/2016 1,000 2 month

20/06/2016 1,500 3 month
15 August, 2016 was a Public holiday. However, 6 September, 2016 was also declared as sudden
holiday.

9. 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: `
6th January, 2016 6,000
2,800
2nd February, 2016
2,000
31st March, 2016
Sales by Green to Red:
Sales by Green to Red `
6th January, 2016 6,600
9th March, 2016 2,400
20th March, 2016 500
You are asked to ascertain the average due date. ( 28 days in feb.)

10. ` 10,000 lent by Dass Bros. to Kumar & Sons on 1st January, 2011 is repayable in 5 equal annual
instalments commencing on 1st January, 2012. Find the average due date and calculate interest
at 5% per annum, which Dass Bros. will recover from Kumar & Sons.

11. A and B, two partners of a firm, have drawn the following amounts from the firm in the year
ending 31st March, 2015:
Date A Date B
` `

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 CA Foundation Accounts|Average Due Date 13.14

1st July 500 12th June 1,000

30th September 800 11th August 500

1st November 1,000 9th February 400

28th February 400 7th March 900

Interest at 6% p.a. is charged on all drawings. Calculate interest chargeable by using
(i) ordinary system
(ii) Average due date system. (assume 1 year = 365 days)

12. Mr. Yash and Mr. Harsh are partners in a firm. They had drawn the following amounts from
the firm during the year ended 31.03.2016:
Date Amount Drawn By
01.05.2015 75,000 Mr. Yash
30.06.2015 20,000 Mr. Yash
14.08.2015 60,000 Mr. Harsh
31.12.2015 50,000 Mr. Harsh
04.03.2016 75,000 Mr. Harsh
31.03.2016 15,000 Mr. Yash
Interest is charged @ 10% p.a. on all drawings. Calculate interest chargeable from each
partner by using Average due date system. (Consider 1st May as base date)

13. Anand purchased goods from Amirtha, the average due date for payment in cash is
10.08.2016 and the total amount due is ` 67,500. How much amount should be paid by Anand
to Amirtha, if total payment is made on following dates and interest is to be considered at
the rate of 12% p.a.
(i) On average due date.
(ii) On 25th August, 2016.
(iii) On 30th July, 2016.

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 CA Foundation Accounts|Average Due Date 13.15

14. RTP May 2018

Calculate average due date from the following information:
Date of bill Term Amount (`)
1st March, 2017 2 months 4,000
10th March, 2017 3 months 3,000
5th April, 2017 2 months 2,000
23rd April, 2017 1 months 3,750
10th May, 2017 2 months 5,000

15. RTP Nov 2018

Mehnaaz accepted the following bills drawn by Shehnaaz.
On 8th March, 2018 4,000 for 4 months.
On 16th March, 2018 ` 5,000 for 3 months.
On 7th April, 2018 ` 6,000 for 5 months.
On 17th May, 2018 ` 5,000 for 3 months.
He wants to pay all the bills on a single day. Find out this date. Interest is charged
@ 18% p.a. and Mehnaaz wants to save ` 157 by way of interest. Calculate the
date on which he has to effect the payment to save interest of ` 157

16. QP May 2018

Mr. Alok owes Mr. Chirag ` 650 on 1st January 2018. From January to March, the
following further transactions took place between Alok and Chirag
January 15 Alok buys goods ` 1,200

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 CA Foundation Accounts|Average Due Date 13.16

February 10 Alok buys goods ` 850

March 7 Alok received Cash loan ` 1,500
Alok pays the whole amount on 31st March, 2018 together with interest @ 6% per
annum. Calculate the interest by average due date method.

17. QP Nov 18
Karan purchased goods from Arjun, the average due date for payment in cash is 10.08.2018
and the total amount due is `1,75,800. How much amount should be paid by Karan to Arjun,
if total payment is made on following dates and interest is to be considered at the rate of
15% p.a.
(i) On average due date (ii) On 28th August, 2018.
(iii) On 29th July, 2018

18. Mock test 2

From the following details calculate the average due date:
Date of Bill Amount (Rs.) Usance of Bill
28th January, 2018 5,000 1 month

20th March, 2018 4,000 2 months

12th July, 2018 7,000 1 month

10th August, 2018 6,000 2 months

19. RTP May 20

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 CA Foundation Accounts|Average Due Date 13.17

Kiran had accepted bills payable to Heena, falling due on different dates. The details of bills are
as follows:
Date of bill Amount Usance of bill
9th April 2018 ` 3,000 for 4 months
18th April 2018 ` 5,500 for 3 months
25th May 2018 ` 3,000 for 6 months
5th June 2018 ` 6,000 for 3 months
On 1st July, it was agreed that these bills should be withdrawn and that Kiran should accept on
that day two bills, one for ` 10,000 due in 4 months and the other for the balance with interest,
due in 6 months. Calculate the amount of the second bill taking interest @ 10% p.a. Take 365
days in year 2018-2019.

20. QP JAN 21
Mahesh had the following bill receivables and bills payables against Rajesh. Calculate the average
dye date, when the payment can be received or made without any loss of interest

Date Bills Receivable Tenure Date Bills Receivable Tenure

12-06-20 5,000 3 months 27-05-20 3,700 3 months
10-07-20 6,200 1 months 07-06-20 4,000 3 months
15-07-20 3,500 3 months 10-07-20 5,000 1 months
12-06-20 1,500 2 months
28-06-20 2,500 2 months
15th august, 2020 was Public holiday. However, 10th September,2020 was also suddenly declared as
holiday.

21. QP NOV 20
Rakesh had the following bills receivable and bills payable against Mukesh.
Date Bills Receivable Tenure Date Bills Receivable Tenure
1st June 3,400 3 months 29th May 2,500 2 months
5th June 2,900 3 months 3rd June 3,400 3 months

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 CA Foundation Accounts|Average Due Date 13.18

9th June 5,800 1 months 9th June 5,700 1 months

12th June 1,700 2 months
20th June 1,900 3 months
15th August was a public holiday. However, 6th September, was also declared a sudden holiday.
Calculate the average due date, when the payment can be received or made without any loss of
interest to either party.

22. Mr. Kapoor had the following Bills receivable and Bills payable against Mr. Khan, the details
of which has been given as follows-
Bills receivable Bills payable
Date Amount Tenure Date Amount Tenure
1.5.2020 400 3 months 11.5.2020 800 60 days
19.6.2020 750 2 months 21.6.2020 950 30 days
25.6.2020 1,000 1 month 28.6.2020 1,150 45 days
7.7.2020 1,250 2 months 10.7.2020 1,800 50 days
14.7.2020 800 2 monthS 16.7.2020 1,250 55 days
Gazetted holidays in the intervening period
15th August (Independence day), 24th July (Emergency holiday), 10th September (Sunday)

23. ` 20,000 lent on 1st January 2015, is repaid as follows-

` 2500 on 1st January 2016
` 5500 on 1st January 2017
` 3000 on 1st January 2018
` 5000 on 1st January 2019
` 4000 on 1st January 2020
Determine the average due date for settling all the above instalments by a single payment and
compute interest at the rate of 10% per annum

24. A partner in a firm has drawn the following amounts for the half year ended on 31st March

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 CA Foundation Accounts|Average Due Date 13.19

2020 :
Date Amount
9th Sep 2019 9,000
10th Oct 2019 10,000
11th Nov 2019 11,000
12th Dec 2019 12,000
13th Jan 2020 13,000
14th Feb 2020 14,000
15th Mar 2020 15,000
Assume February has 28 days

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