FUNDAMENTALS OF BUSINESS MATHEMATICS AND STATISTICS I 1.251.3.2 AVERAGE DUE DATE
Meaning
Average Due date is the mean or equated date on which a single payment of an aggregate sum may be
made in lieu of several payments due on different dates without, however, involving either party to suffer
any loss of interest, i.e, the date on which the settlement takes place between the parties is known as
Average or Mean Due Date.
This is particularly helpful in the settlement of the following types of accounts, viz., :
(i) in case of accounts which are to be settled by a series of bills due on different dates ; (ii) in case of
calculation of interest on drawings of partners; (iii) in case of piecemeal distribution of assets during partnership
dissolution etc.; and (iv) in the case of settlement of accounts between a principal and an agent.
Types of Problems
Two types of problems may arise. They are :
(1) Where amount is lent in various instalments but repayment is made in one instalment only;
(2) Where amount is lent in one instalment but repayment is made in various instalments.
Method (1) : Where amount is lent in various instalments but repayment is made in one instalment :
Step 1. Take up the starting date’(preferably the earliest due date as ‘0’ date or ‘base date’ or ‘starting
date’);
Step 2. Calculate the number of days from ‘0’ date to each of the remaining due dates;
Step 3. Multiply each amount by the respective number of days so calculated in order to get the product;
Step 4. Add up the total products separately;
Step 5. Divide the total products by the total amounts of the bills;
Step 6. Add up the number of days so calculated with ‘0’ date in order to find out the Average or Mean
Due Date.
Date of Maturity and Calculations
If there is an after date bill, the period is to be counted from the date of drawing the bill but when there is
any after sight bill, the said period is to be counted from the date of acceptance of the bill. For example, if
a bill is drawn on 28th January 2013, and is made payble at one month after date, the due date will be 3rd
day after 28th Feb. i.e., 2nd March 2013.
To Sum up
(i) When the period of the bill is stated in days, the date of maturity will also be calculated in terms of
days i.e., excluding the date of transaction but including the date of payment.
E.g. If a bill is drawn on 18th January 2012 for 60 days, the maturity will be 21st March 2012.
(ii) If the period of the bill is stated in month, the date of maturity will also be calculated in terms of
month neglecting, however, the number of days in a month.
E.g. If a bill is drawn on 20th May, 2012 for 3 months, of date of maturity will, naturally, be 23rd August, 2012.
(iii) What the date of maturity of a bill falls on ‘emergent holiday’ declared by the Government, the date
of maturity will be the next working day.
(iv) When the date of maturity of a bill falls on a public holiday, the bill shall become due on the next
preceding business day and if the next preceding day again falls on a public holiday, it will become
due on the day preceding the previous day — Sec. 25.
E.g. If the date of maturity of a bill falls on 15th August (Independence day) it falls due on 14th
August. But if 14th August falls again on a public holiday, the 13th August will be. considered as the
date of maturity.