FUNDAMENTALS OF BUSINESS MATHEMATICS AND STATISTICS I 1.33In case of Mutual dealings between the parties
It frequently happens in real-world situation that an individual plays both the role of a debtor as well as a
creditor, i.e., mutual dealings. For example. Mr. X purchases raw materials from Y and he sells finished
products to him. Consequently, for settlement purpose, who owes the higher amount pays the differece to
the other person together with interest for the balance.
The following steps should carefully be followed for the purpose :
Step I Find out the Product of both receivable and payable in usual manner like ordinary average due
date method.
Step II Find out the difference of the product.
Step III Find out the difference of the amounts.
Step VI Average Due Date = ‘0’ + Difference in ProductDifference in Amount
Step V For Calculation of Interest:
= Balance of Amount
Settlement Date - Average Due Date
× × 365 days or 12 months
Rate of Interest
100
Example 50 :
Mr. Big purchased goods from Mr. Small as follows : He also sold goods to Mr. Small as follows:
4,000 to be paid on 6th January 2012 1,500 to be paid on 10th January 2012
2,000 to be paid on 3rd February 2012 2,500 to be paid on 15th February 2012
3,000 to be paid on 31st March 2012 1,000 to be paid on 21st March 2012
Mr. Big settled the account on 21st April 2012
(a) Find out the average due date.
(b) Calculate the interest at 5% p.a. from the average due date to the date of settlement.
Solution :
Calculation of Average Due Date
(a) For Big’s Purchases
6th January 2012 is taken as the starting date or ‘0’ date
Date of Transaction Amount No. of days from Product
‘0’date
6.1.2012 4,000 0 0
3.2.2012 2,000 28 56,000
31.3.2012 3,000 84 2,52,000
9,000 3,08,000
(b) For Big’s Sales
Date of Transaction Amount No. of days from Product
‘0’date
10.1.2012 1,500 40 6,000
15.2.2012 2,500 40 1,00,000
21.3.2012 1,000 74 74,000
5,000 1,80,000