CHAPTER- AVERAGE DUE DATE (ADD)

Due Date - That date on which any amount is payable or receivable.

Average Due Date - That date on which total amount is payable & receivable is known as
average due date.

Topic to be discuss:-

(i) Meaning of Avg. De Date

(ii) Calculation of Avg. due date in case of One side Transaction
(iii) Calculation of Avg. due date in case of Both side Transaction
(iv) Calculation of Avg. due date in case of Bills of exchange
(v) Calculation of Avg. date of drawing /interest in case of Drawings of partners
(vi) Calculation of Avg. due date in case of Loan Transaction

(i) Meaning of ADD - ADD is Due Date of total amount, if total amount is paid on Avg.
Due Date then there will be no loss of interest or benefits of interest
to either party

(ii) Calculation of Avg Due Date in Case of One Side Transaction -:

Use following steps:-

Step 1-. Calculate due date for all transaction .

Due date = Transaction date + Cr. period
{Note- In absence of credit period, Due Date = Transaction Date}

Step 2.- Calculate Due amount for all transaction.

Due Amount = Transaction Amount - Trade Discount
{Note- In the absence of Trade discount, Due Amount = Transaction Amount}
Step 3.-Take earlier due date as base date
Step 4.-Calculate Period :- Period = Due Date – Base Date
Step 5.-Calculate Product :- Product = (Amount x Period)
Step 6.- Calculate sum of product & sum of amount
Step .7- Calculate ADD.:-
𝑠𝑢𝑚 𝑜𝑓 𝑝𝑟𝑜𝑑𝑢𝑐𝑡
𝐴𝑣𝑔 𝐷𝑢𝑒 𝑑𝑎𝑡𝑒 = 𝐵𝑎𝑠𝑒 𝑑𝑎𝑡𝑒 + ( )
𝑠𝑢𝑚 𝑜𝑓 𝐴𝑚𝑜𝑢𝑛𝑡

Step 8. – If payment date is given in question than calculate interest

𝑅 𝑃𝑒𝑟𝑖𝑜𝑑 (𝐴𝐷𝐷 𝑡𝑜 𝑃𝑎𝑦𝑚𝑒𝑛𝑡 𝐷𝑎𝑡𝑒
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 = 𝑇𝑜𝑡𝑎𝑙 𝑎𝑚𝑜𝑢𝑛𝑡 × × )
100 365/12
Format-

Due date Amount Period Product

(DD-BD) (Amt x period)

Sum of Amount Sum of product

(iii) Calculation of Avg. Due Date in case of Both side Transaction :-

Use followings Step:-
Step1.- Calculate Due Date for all transaction.
Due date = T.D + Cr. Period
Step2.-Calculate Due Amount for all transaction ,
Due Amt.= Trans. Amt.- Trade Dis.
Step 3-Take earliest due date as base date and prepare two separate Avg. Due Date
table (one for receivables other for payable)
𝐷𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝑜𝑓 𝑠𝑢𝑚 𝑜𝑓 𝑝𝑟𝑜𝑑𝑢𝑐𝑡
Step 4- ADD = B.D + { }
𝐷𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝑜𝑓 𝑠𝑢𝑚 𝑜𝑓 𝑎𝑚𝑜𝑢𝑛𝑡
Step 5- If ADD and Payment Date are difference then calculate interest on Net amount
R period
Interest = Net amount × ×
100 365 DAY OR 12 M

(iv) Calculation of Avg due date in case of Bills of exchange:-

Bills of exchange (B.R /B.P)

Demand Bill Time Bill

Period not specified period specified

Due date = the date of which bill presented

for payment Payable after date payable after Sight
(P/D) (P/S)
3 Days of Grace days are not consider
Due date = date of drawn+term+3days Due date = Date of
acceptance + term+
3 days

:
 Note:-
1. If Due Date is on public holiday than previous date will be the due date
2. If there is incidental holiday on Due date than next date will be the due date
3. Holidays which are given in question are consider as public holiday
4. After calculation Due Date of every BOE, process of calculation of ADD will remain
same
5. If nothing is given in question than bill is consider as payable after date

(v) Calculation of Avg Date of /Interest in case of Drawing by Partners :-

Step.1- Procedure of calculation of ADD will remain same
Step.2-Due Date = Date of drawing
Step.3- Here, ADD = Avg Date of Drawings
R period
Step.4- Interest = Total drawing amount × ×
100 365 DAY OR 12 M

Period = ADD to Year End Date

(vi) Calculation of Avg Due Date in case of Loan Transaction:- Use following steps,
Step.1- Calculate due date of each installment
Step.2- Find out due amount of each installment
Step.3- Take earliest due date as base date
Step.4- Calculate period from base date to due date of each installment
Step.5 – Calculate product
Step.6-Calculate ADD -
𝑆𝑂𝑃
ADD = B.D + ( )
𝑆𝑂𝐴

Step.7- Calculate interest on loan amount from Date of loan to ADD

R period
Interest = Loan amount × ×
100 365 DAY OR 12 M
Note :- Period = Date of Loan to ADD (repayment date)