CHAPTER AVERAGE DUE DATE

THIS CHAPTER INCLUDES

• Introduction • Amount lent in various Instalments

• Concept of due date (Date of Maturity) • Amount lent in one Instalment

• Uses of Average Due Date

• Calculation of Interest on Drawings

OBJECTIVE QUESTIONS
1995 - Nov [5] State with reasons whether the following statement is true or false:
(7) If payment is made on the average due date, it results in loss of interest to creditors. (1.5
marks)
Answer:
False: Such payment neither results in loss of interest to the creditors not to the debtors. It
compensates the loss or gain of interest.
1999 - May [5] State with reasons whether the following statement is true or false:
(i) Average due date is the median average of several due dates for payments. (2 marks)
Answer:
False: Average due date is an equated date for several due dates of payments.
1999 - May [5] State with reasons whether the following statement is true or false:
(viii) In the calculation of average due date, only the due date of the first transaction must be
taken, as the base date. (2 marks)
Answer:
False: Due date of any transaction can be taken as the base date. However, it is preferable
to take the due date of first transaction as the base date.
PRACTICAL QUESTIONS
1995 - Nov [3] (Or) Calculate Average Due Date from the following information:

Date of the bill Term Amount

Rs.

August 10, 1994 3 months 6,000

October 23, 1994 60 days 5,000

December 4, 1994 2 months 4,000

January 14, 1995 60 days 2,000

March 8, 1995 2 months 3,000 (15 marks)

Answer:
Calculation of Average Due Date

Date of Bill Term Due Date No. of Days Amount Product

from 10th
Rs.
Aug. 1994

Aug. 10, 1994 3 months Nov. 13, 1994 95 6,000 5,70,000

Oct. 23, 1994 60 days Dec. 25, 1994 137 5,000 6,85,000

Dec. 04, 1994 2 months Feb. 07, 1995 181 4,000 7,24,000

Jan. 14, 1995 60 days Mar. 18, 1995 220 2,000 4,40,000

March 08, 1995 2 months May 11, 1995 274 3,000 8,22,000

20,000 32,41,000

Average Due Date

Total of Product
= Base Date + days equal to
Total of Amount
32,41,000
= 10th Aug. 1994 +
20,000
th
= 10 Aug. 1994 + 162.05
= 162 days (approx.) after Aug. 10, 1994] i.e. January, 19, 1995
1996 - Nov [3] (b) 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.
(5 marks)
Answer:
Calculation of Average Due Date

Due Dates Amount No. of Days from Products

April 1
Rs.

April 1, 1996 2,000 0 0

April 10, 1996 5,000 9 45,000

May 16, 1996 10,000 45 4,50,000

June 9, 1996 3,000 69 2,07,000

Total 20,000 7,02,000

 Total of Product
Average Due Date = Base Date + Days equal to Total of Amount
7,02,000
Average Due Date = 1st April + 20,000

= 1st April + 35 days

= 6th May, 1996
Interest therefore has been calculated on Rs. 20,000 from 6 th May, 1996 i.e.,
15 55
Interest = 20,000 × 100 × 366 = Rs. 450.82
1997 - Nov [4] (Or) (b) Calculate Average Due Date from the following information:

Date of the bill Term Amount

Rs.

August 10, 1996 3 Months 6,000

October 23, 1996 60 Days 5,000

December 4, 1996 2 Months 4,000

January 14, 1997 60 Days 2,000

March 8, 1997 2 Months 3,000 (10 marks)

Answer:

Calculation of Average Due Date

Date of Bill Term Due Date No. of Days Amount Product

from the Rs.

base date

(10th August)

Aug. 10, 1996 3, months Nov. 13, 1996 95 6,000 5,70,000

Oct. 23, 1996 60 days Dec. 24, 1996 136 5,000 6,80,000

Dec. 14, 1997 2 months Feb. 07, 1997 181 4,000 7,24,000

Jan. 14, 1997 60 days Mar. 18, 1997 220 2,000 4,40,000

March 08, 1997 2 months May 11, 1997 274 3,000 8,22,000

Total 20,000 32,36,000

Total of Product
Average Due Date = Base date + days equal to
Total of Amount
32,36,000
= 10th August + 20,000

= 10th August + 161.8

= 162 days (Approx.) after 10th August, 1996
i.e. 19th January, 1997.
Note: The due date of the second bill dated 23rd October, 1996 is 25th December, 1996.
Since 25th December is a public holiday, the preceding day i.e., 24th December has been
considered as the due date.
1998 - Nov [4] (b) 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, 1998 — 6,000

2nd February, 1998 — 2,800

31st March, 1998 — 2,000

Sales by Green to Red:

6th January, 1998 — 6,600

9th March, 1998 — 2,400

20th March, 1998 — 500

You are asked to ascertain the average due date. (7 marks)

Answer:
Calculation of Average Due Date
Taking 6th January, 1998 as the base date:
For Green's payments

Due Date Amount No. of days from the Products

base date, i.e., 6th Jan.
Rs.

1998

6th January 6,000 0 0

2nd February 2,800 27 75,600

31st March 2,000 84 1,68,000

Total 10,800 2,43,600

For Red's payments

Due Dates Amount Rs. No. of Days from Products

April 1

1998

6th January 6,600 0 0

9th March 2,400 62 1,48,800

20th March 500 73 36,500

Total 9,500 1,85,300

Excess of Green's products over Red's = Rs. 2,43,600 - Rs. 1,85,300

Rs. 58,300
Balance due to Red = Rs. 10,800 - Rs. 9,500 = Rs. 1,300
58,300
Number of days from the base date to the date of settlement is 1,300

= 45 days (approx.)
Therefore, the date of settlement of the balance amount is 45 days after 6th January, i.e., on
20th February.
On 20th February 1998, Green has to pay Red Rs. 1,300 to pay-off the account.
2000 - Nov [3] (b) E owes to F the following amounts:
(i) Rs. 5,000 due on 10th March, 1999
(ii) Rs. 18,000 due on 2nd April, 1999
(iii) Rs. 60,000 due on 30th April, 1999
(iv) Rs. 2,000 due on 10th June, 1999.
He desires to make full payment on 30th June, 1999 with interest at 10% per annum from
the average due date. Find out the average due date and the amount of interest. (6 marks)
Answer:
Calculation of Average Due Date
Taking 10th March, 1999 as the Base Date.

Due Date Amount Rs. No. of days from the Products

base date i.e.,

10th March

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

Total 85,000 36,58,000

Sum of Product
Average due date = Base date + days equal to Sum of Amount
Rs.36,58,000
= 10th March + 85,000
i.e. 43 days (approx.)

= 22nd April, 1999

Computation of Interest: Interest can be calculated on' 85,000 from 22nd April, 1999 to
30th June, 1999 at 10% p.a. i.e., interest on Rs. 85,000 for 69 days at 10%.
10 69
= Rs. 85,000 × 100 × 365

= Rs. 1,607(approx.)
2002 - Nov [3] (c) ‘A1 lent Rs. 25,000 to 'B1 on 1st January, 2000. The amount is repayable
in 5 half-yearly instalments commencing from 1st January, 2001. Calculate the Average due
date and Interest @ 10% per annum.
(3 marks)
Answer:
12 + 18 + 24 + 30 + 36
Average Due Date =1 Jan. 2000 + ( ) months
5

= 1 Jan. 2000 + 24 months = 1 Jan. 2002

10
Interest to be charged = 25,000 × 100 × 2

= Rs. 5,000
2004 - Nov [2] (a) Calculate average due date from the following informations:

Date of Bill Term Amount

Rs.

16 August, 03 3 months 3,000

20 October, 03 60 days 2,500

14 December, 03 2 months 2,000

24 January, 04 60 days 1,000

06 March, 04 2 months 1,500 (6 marks)

Answer:

Bill Date (A) (B) (C) Due date (D) No. of days Product (F)
(Including grace (Taking (E) = (B)
Amount Term
period)
19.Nov. 03 × (E) (Rs.)
Rs.
as base)

16 Aug, 2003 3,000 3 Months 19 Nov 03 0 0

20 Oct, 2003 2,500 60 Days 22 Dec, 03 33 82,500

14 Dec, 2003 2,000 2 Months 17 Feb 04 90 1,80,000

24 Jan, 2004 1,000 60 Days 27 March 04 129 1,29,000

06 March, 2004 1,500 2 Months 09 May 04 172 2,58,000

10,000 6,49,500
 Sum of Product
Average due date = Base date + Days equal to Sum of Amount
6,49,500
= 19 Nov, 03 + 10,000

= 19 Nov, 03 + 65 days (approx)

= 23 Jan, 2004