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.

• 1^st installment due will be base date.

• Days/month/year   from 1^st 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.