Average due date

Average due date

  • It is the date on which debtor can pay all the amount due without gain or loss of interest.

  • It is a date on which single payment can be realized against various dues.

  • If actual payment is made earlier than ADD, gain or rebate will arise, while after ADD loss or interest expenses should be paid.

Steps for solution:

  • Step 1  determine base date (generally it is a first due date of the debt)

  • Step 2 consider the no of days from the base date to due date of each debt.

  • Step 3 multiply no of days and amount due. It is called product of each debt .

  • Step4  make sum of various product

  • Step 5 no of days from the base date =  sum of the product / sum of debt

  • Step 6  ADD = base date +step no                                                          5(days)

Calculation of ADD in case of loan transactions;

  • Similar to earlier steps will be followed.

  • 1st installment due will be base date.

  • Days/month/year   from 1st installment to each installment due will be calculated.

When two parties purchase and sale from each other simultaneously.

  •     ADD will be calculated by following steps.

  • Calculate due date of each transaction of purchase and sale in separate table.

  • Take the base date which is earliest due date in both table.

  • Calculate days from base date

  • Find the product of each table

  • Calculate net product and net amount

  • Days =sum of net product/sum of net amount

  • ADD = Base date + no of days as                                               per step 5

  • When only credit period is given no bill is given 3 days of grace will not be added.

  • When credit period is not given transaction date will be due date.

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