ACCOUNTING FOR SPECIAL TRANSACTIONS 6.

149

UNIT 7 : ACCOUNT CURRENT

LEARNING OUTCOMES
After studying this unit, you will be able to:

a) Understand the meaning of Account Current.

b) Learn the methods of preparing Account Current, namely preparation of Account Current with the help
of interest tables, by means of product and by means of balances.

c) Understand the calculation procedure involved in the preparation of Account Current.

UNIT OVERVIEW WAY OF PREPARING ACCOUNT CURRENT

By means of
With the help of By means of
products of
interest tables products
balances

7.1 INTRODUCTION
An Account Current is a running statement of transactions between parties for a given period of time and
includes interest allowed or charged on various items. It takes the form of an ledger account.
Some of the situations when account current is prepared are:
1. It is prepared when frequent transactions regularly take place between two parties. An example is of a
manufacturer who sells goods frequently to a merchant on credit and receives payments from him in
instalments at different intervals and charges interest on the amount which remains outstanding.
2. A consignee of goods can also prepare an Account Current, if the latter is to settle the account at the
end of the consignment & interest is chargeable on outstanding balance.
3. An Account Current also is frequently prepared to set out the transactions taking place between a
banker and his customer.
4. It is prepared when two or more persons are in joint venture and each co-venture is entitled to interest
on their investment. Also, no separate set of book is maintained for it.
An Account Current has two parties - one who renders the account and the other to whom the account is
rendered. This is indicated in the heading of an Account Current, which is like the following: “A in Account
Current with B”. It implies that A is the customer, and the account is being rendered to him by B.

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 6.150 PRINCIPLES AND PRACTICE OF ACCOUNTING

7.2 PREPARATION OF ACCOUNT CURRENT

There are three ways of preparing an Account Current:
(i) With help of interest table
(ii) By means of products
(iii) By means of products of balances

7.2.1 Method 1: Preparation of Account Current with the help of Interest Tables-Individual Method
According to this method, all the transactions are arranged in the form of an account. There are two
additional columns on both the sides of such an account.
(a) One column is meant to indicate the number of days counted from the due date of each transaction to
the date of rendering the account. If no specific date is mentioned as the date on which payment is due,
the date of the transactions is presumed to be the due date.
(b) The other column is meant for writing interest.
With the help of ready made tables, interest due on different amounts at given rates for different periods of
time is found out and this is entered against each item separately.
The interest columns of both the sides are totalled up and the balance is drawn.

? ILLUSTRATION 1
Prepare Account Current for Nath Brothers in respect of the following transactions with Shyam:

2015 `

September 16 Goods sold to Shyam 200 due 1st Oct.

October 1 Cash received from Shyam 90

October 21 Good purchased from Shyam 500 due 1st Dec.

November 1 Paid to Shyam 330

December 1 Paid to Shyam 330

December 5 Goods purchased from Shyam 500 due 1st Jan.

December 10 Goods purchased from Shyam 200 due 1st Jan.

2016

January 1 Paid to Shyam 600

January 9 Goods sold to Shyam 20 due 1st Feb.

The account is to be prepared upto 1st February. Calculate interest @ 6% per annum. (1 year = 365 days)

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 ACCOUNTING FOR SPECIAL TRANSACTIONS 6.151

 SOLUTION
Shyam in Account Current with Nath Brothers
(Interest to 1st February, 2016 @ 6% p.a.)
Date Particulars Due Amount Days Inter- Date Particulars Due Amount Days Interest
est
2015 date ` 2015 date `
Sept.16 To Sales 1st Oct. 200 123 4.04 Oct. 1 By Cash A/c 1st Oct. 90 123 1.82
A/c
Nov.1 To Cash A/c 1st Nov. 330 92 5 Oct. 21 By Purchase 1st Dec. 500 62 5.1
A/c
Dec. 1 To Cash A/c 1st Dec. 330 62 3.36 Dec. 5 By Purchase 1st Jan. 500 31 2.55
A/c
Dec.10 By Purchase 1st Jan. 200 31 1.02
A/c
2016 2016
Jan. 1 To Cash A/c 1st Jan. 600 31 3.06 Feb. 1 By Balance of 4.97
Interest
Jan. 9 To sales A/c 1st Feb. 20 Feb.1 By Balance c/d 194.97 -
Feb. 1 To Interest 4.97
1,484.97 15.46 1,484.97 15.46

Tutorial Notes:
(1) While counting the number of days, the date of due date is ignored and the date upto which the account
is prepared, is included.
(2) While counting the number of days, for opening balances, the opening date as well as date upto which
the account is prepared, is counted.
Calculation of days:

Transaction Due Date Oct. Nov. Dec. Jan. Feb. Total Days
2014
16th Sept. 1st Oct. 30+ 30+ 31+ 31+ 1= 123
1st Oct. 1st Oct. 30+ 30+ 31+ 31+ 1= 123
21st Oct. 1st Dec. - - 30+ 31+ 1= 62
1st Nov. 1st Nov. - 29+ 31+ 31+ 1= 92
1st Dec. 1st Dec. - - 30+ 31+ 1= 62
5th Dec. 1st Jan. - - - 30+ 1= 31
10th Dec. 1st Jan. - - - 30+ 1= 31
2015
1st Jan. 1st Feb. - - - 30+ 1= 31
9st Jan. 1st Feb. - - - - -= 0

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 6.152 PRINCIPLES AND PRACTICE OF ACCOUNTING

7.2.2 Method 2: Preparation of Account Current by means of Products; Product Method

When this method is followed, the way of preparing the Account Current remains the same. In this method
is only the method of calculating interest is different.
Under the previous method, interest columns are provided on both the sides of the Account Current, and
interest in respect of each item is found out from the ready-made interest tables. In this method, interest
columns are replaced by “product” columns. Product in this case is the amount multiplied by the number
of days for which it has been outstanding. Interest on a certain sum of money for a certain number of days
is the same thing as interest on the product for one day. In other words, with a view to reduce the period
of each transaction to one day, the amount of each transaction is multiplied by the number of days. This
product is entered against each transaction the product column.
The remaining steps are as follows:
(a) Find out the balance of the products on the two sides.
(b) Calculate interest at the given rate on the balance of the products for a single day.
(c) Enter interest on the appropriate side in the amount column. This entry is made on the side other than
that on which the balance of products appears.
Taking Illustration 1 Account Current by means of Product is explained below :
Shyam in Account Current with Nath Brothers
(Interest to 1st February, 2016 @ 6% p.a.)
Date Particulars Due Amount Days Product Date Particulars Due Amount Days Product
2015 date ` ` ` 2015 date ` ` `
Sept. 16 To Sales A/c 1st Oct 200 123 24,600 Oct. 1 By Cash A/c Oct.1 90 123 11,070
1 Nov. To Cash A/c 1st Nov 330 92 30,360 Oct.21 By Purchase A/c Dec.1 500 62 31,000
1 Dec. To Cash A/c 1st Dec 330 62 20,460 Dec.5 By Purchase A/c Jan. 1 500 31 15,500
Dec.10 By Purchase A/c 1-Jan 200 31 6,200
2016 2016
Jan.1 To Cash A/c 1-Jan 600 31 18,600 Feb.1 By Balance of 30,250
products
Jan.9 To Sales A/c 1-Feb 20 Feb.1 By Balance c/d 194.97
Feb.1 To Interest 4.97
(30,250x6%)/365

1,484.97 94,020 1,484.97 94,020

2016
Feb To Balance b/d 194.97

7.2.3 Method of Computing the numbers of Days

Usually any of the following two methods is used for calculating the number of days.
1. Forward Method- Under this method the number of days are calculated from the due date of the
transaction to the date of closing the account.

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 ACCOUNTING FOR SPECIAL TRANSACTIONS 6.153

2. Backward (or Epoque Method)- Under this method, the number of the days are calculated from the
opening date of statement to the due date of transaction.
EXAMPLE
From the following particulars, make up an Account Current to be rendered by Mr. X to Mr. Y on 31st December,
2016 taking interest into account at the rate of 18% p.a.

01.07. 2016 Balance owing by Mr. Y ` 600

30.07. 2016 Goods sold to Mr. Y (Credit Period allowed 1 month) ` 300

01.08. 2016 Good purchased from Mr. Y (Credit Period received 1 month) ` 200

01.09. 2016 Cash received from Mr. Y ` 100

01.09. 2016 Mr. Y accepted Mr. X’s Draft at 3 Months date ` 400

You are required to prepare the Account Current according to interest on individual transaction under the Forward
and Backward methods.

 SOLUTION
(a) Product of individual Transaction Method (Forward Method)
Mr. Y in Account Current with Mr. X (interest to 31st Dec. 2016 @ 18% p.a.)

Date Particulars Due Amt. Days Product Date Particulars Due Amt. Days Product
` ` ` `
date date
01.07.2016 To Balance b/d 600 184 1,10,400 01.08.2016 By Sep. 1 200 121 24,200
Purchase
A/c
30.07.2016 To Sales A/c Aug 300 123 36,900 01.09.2016 By Cash A/c Sep. 1 100 121 12,100
30
31.12. 2016 To Interest on 49 01.09.2016 By B/R A/c Dec. 4 400 27 10,800
Balance
for 1 day @
18%

[ [
1,00,200 x 18 x 1
100 x 365

31.12.2017 By Balance 1,00,200

of Products
31.12.2017 By Balance 249
c/d
949 1,47,300 949 1,47,300

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 6.154 PRINCIPLES AND PRACTICE OF ACCOUNTING

b) Product of individual Transaction Method (Epoque Method)

Mr. Y in Account Current with Mr. X (interest to 31st Dec. 2016 @ 18% p.a.)
Date Particulars Due Amt. Days Product Date Particulars Due Amt. Days Product
` ` date ` `
date
01.07.2016 To Balance b/d 600 01.08.2016 By Purchase Sep. 1 200 63 12,600
A/c
30.07.2016 To Sales A/c 30- 300 61 18,300 01.09.2016 By Cash A/c Sep. 1 100 63 6,300
Aug
31.12.2016 To Balance of 1,00,200 01.09.2016 By B/R A/c Dec. 4 400 157 62,800
Product
31.12.2016 To Interest on 49 31.12.2016 By Balance 36,800
Balance for 1 of
day @ 18% Products
[200 x
[1,00,200 x 18 x 1
100 x 365 [ 184]

31.12.2016 By Balance 249

c/d
949 - 1,18,500 949 1,18,500

? ILLUSTRATION 2

From the following particulars prepare the account current to be rendered by Mr. Singh to Mr. Paul as on 31st
August, 2016. Interest must be calculated @ 10% p.a. (1 year = 365 days)

2014 `
June 11 Goods sent to Mr. Paul 1,020
June 15 Cash received from Mr. Paul 500
June 20 Goods sent to Mr. Paul 650
July 7 Goods sent to Mr. Paul 700
Aug 8 Cash received from Mr. Paul 1,100

 SOLUTION
Mr. Paul in Account Current with Mr. Singh
(Interest to 31st August, 2016 @ 10% p.a.)
Date Particulars Due Amount Days Product Date Particulars Due Amount Days Product
2016 Date ` 2016 Date `
June 11 To Sales A/c June 11 1,020 81 82,620 June 15 By Cash A/c June 15 500 77 38,500
June 20 To Sales A/c June 20 650 72 46,800 Aug.8 By Cash A/c Aug.8 1,100 23 25,300
July 7 To Sales A/c July 7 700 55 38,500 Aug.31 By Balance of 1,04,120
product
Aug.31 To Interest A/c 28.53 Aug. 31 Balance c/d 798.53

1,04,120 10
x 100
365
2,398.53 1,67,920 2,398.53 1,67,920
Sept. To Balance b/d 798.53

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 ACCOUNTING FOR SPECIAL TRANSACTIONS 6.155

? ILLUSTRATION 3
From the following particulars make up an Account Current to be rendered by S. Dasgupta to A. Halder at 31st
Dec. reckoning interest at 5% p.a. (assume 1 year = 365 days)

2016 `
June 30 Balance owing by A. Halder 520
July 17 Goods sold to A. Halder 40
Aug. 1 Cash received from A. Halder 500
Aug. 19 Goods sold to A. Halder 720
Aug. 30 Goods sold to A. Halder 50
Sept. 1 Cash received from A. Halder 400
Sept. 1 A. Halder accepted Dasgupta’s Bill at 3 month date for 300
Oct. 22 Goods bought from A. Halder 20
Nov. 12 Goods sold to A. Halder 14
Dec. 14 Cash received from A. Halder 50

 SOLUTION
A. Halder in Current Account with Mr. S. Dasgupta
(Interest to 31st December, 2016 @ 5% p.a.)

Date Particulars Due Amount Days Product Date Particulars Due Amount Days Product

2016 Date ` 2016 Date `

June 30 To Balance b/d 520 185 96,200 Aug.1 By Cash A/c Aug.1 500 152 76,000

July 17 To Sales A/c July 17 40 167 6,680 Sep.1 By Cash A/c Sep.1 400 121 48,400

Aug.19 To Sales A/c Aug.19 720 134 96,480 Sep.1 By Bills Dec.4 300 27 8,100
Receivable

A/c (Note : 1)

Aug. 30 To Sales A/c Aug.30 50 123 6,150 Oct.22 By Purchases Oct.22 20 70 1,400
A/c

Nov.12 To Sales A/c Nov.12 14 49 686 Dec.14 By Cash A/c Dec.14 50 17 850

Dec.31 By Balance of 71,446

product

31 Dec. To Interest A/c 9.79 Dec.31 By Balance b/d

83.79 -------

71,446 x 5%
365
1,353.79 2,06,196 1,353.79 2,06,196

Note: It is assumed that the bill was honoured on due date. The due date of the bill should be treated as date
of payment and days to be calculated from the due date of account.

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 6.156 PRINCIPLES AND PRACTICE OF ACCOUNTING

Workings:
Calculation of Days
Date of Transactions : Due date June July Aug. Sept. Oct. Nov. Dec. Total
Opening Balance 1 +31 +31 +30 +31 +30 +31 = 185
July 17 July 17 - 14 +31 +30 +31 +30 +31 = 167
Aug. 1 Aug. 1 - - 30 +30 +31 +30 +31 = 152
Aug. 19 Aug. 19 - - 12 +30 +31 +30 +31 = 134
Aug. 30 Aug. 30 - - 1 +30 +31 +30 +31 = 123
Sep. 1 Sep. 1 - - - 29 +31 +30 +31 = 121
Sep. 1 Dec. 4 - - - - - - 27 = 27
Oct. 22 Oct. 22 - - - - 9 +30 +31 = 70
Nov. 12 Nov. 12 - - - - - 18 +31 = 49
Dec. 14 Dec. 14 - - - - - - 17 = 17
Note: While counting the number of days, for opening balances, the opening date as well as date upto
which the account is prepared, is counted.

? ILLUSTRATION 4
From the following prepare an account current, as sent by A to B on 30th June, 2016 by means of products method
charging interest @ 6% p.a:
2016 `
Jan. 1 Balance due from B 600
Jan.11 Sold goods to B 520
Jan. 18 B returns Goods 125
Feb 11 B Paid by cheque 400
Feb 14 B accepted a bill drawn by A for one month 300
Apr. 29 Goods sold to B 615
May 15 Received cash from B 700

 SOLUTION
B in Account Current with A
for the period ending on 30th June, 2016
Date Particulars Amount Days Products Date Particulars Amount Days Products
2016 ` 2016 `
Jan.1 To Balance b/d 600 182 1,09,200 Jan.18 By Sales Returns 125 164 20,500
Jan. 11 To Sales A/c 520 171 88,920 Feb. 11 By Bank A/c 400 140 56,000
Apr. 29 To Sales A/c 615 62 38,130 Feb. 14 By B/R A/c (due 300 105 31,500
June 30 To Interest A/c 15.75 date: March 17)
May 15 By Cash A/c 700 46 32,200
June By Balance of 96,050
30 products
By Balance c/d 225.75
1,750.75 2,36,250 1,750.75 2,36,250

Calculation of interest:
96,050 6
Interest = x = ` 15.75
366 100

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 ACCOUNTING FOR SPECIAL TRANSACTIONS 6.157

Red - Ink Interest: In case the due date of a bill falls after the date of closing the account, then no interest
is allowed for that. However, interest from the date of closing to such due date is written in “Red-Ink” in
the appropriate side of the ‘Account current’. This interest is called Red-Ink interest. This Red Ink interest is
treated as negative interest. In actual practice, however the product of such bill [value of bill X (due date-
closing date) is written in ordinary ink in the opposite side on which the bill is entered]. It means interest
from future date from date of account current i.e., present date. In earlier periods, it was written in red ink;
hence it got the name of red ink interest. It implies that rebate will be allowed on interest paid/ received, if
settlement of future due transaction is done on account current date
This can also be understood in a different way. In an account current, interest is calculated on the amount
of a bill from the date of transaction to the closing date of the period concerned. In case the due date of
the bill falls after the closing date of the accounts, then no interest is allowed for that period. Such interest
is customarily written in red ink in the appropriate side of the account current. The interest is called Red-Ink
interest and is treated as negative interest.

? ILLUSTRATION 5
Following transaction took place between X and Y during the month of April, 2016.
April `
1 Amount payable by X to Y 10,000
7 Received acceptance of X to Y for 2 months 5,000
10 Bills receivable (accepted by Y) on 7.2.2016is honoured on this due date
10 X sold goods to Y (invoice dated 10.5.2016) 15,000
12 X received cheque form Y dated 15.5.2016 7,500
15 Y sold goods to X (invoice dated 15.5.2016) 6,000
20 X returned goods sold by Y on 15.4.2016 1,000
20 Bill accepted by Y is dishonoured on this due date 5,000
You are required to make out an account current by products method to be rendered by X to Y as on 30.4.2016,
taking interest into account @ 10% p.a. (assume 1 year = 365 days)

 SOLUTION
‘Y’ In Account Current with ‘X’
(Interest to 30th April, 2016 @ 10% p.a.)
Date Particulars Due Amount Days Product Date Particulars Due Amount Days Product
Date ` Date `
2016 2016 2016 2016
April 7 To Bills June 10 5,000 - - April 1 By Balance b/d 10,000 30 3,00,000
Payable
April 10 To Sales A/c May 10 15,000 - - April 12 By Bank A/c May 15 7,500 - -
(Cheque received
dated 15.5.2016)
April 20 To Purchase May 15 1,000 - - April 15 By Purchase A/c May 15 6,000 - -
Returns (invoice dated
15.5.2016)
April 20 To Bill April 20 5,000 10 50,000
Receivable
A/c

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 6.158 PRINCIPLES AND PRACTICE OF ACCOUNTING

April 30 To Red Ink May 15 15 1,12,500 April 30 By Red Ink Product June10 - 41 2,05,000
Product as per contra
(` 7,500 x15) (5,000 x 41)
as per contra
April 30 To Red Ink May 15 15 90,000 April 30 By Red Ink May 10 - 10 1,50,000
Product Product
(` 6,000 x15) as per contra
as per contra (15,000 x 10)
April 30 To Balance 4,17,500 April 30 By Red Ink May 15 - - 15,000
of Product as per
product contra
(1,000 x 15)
April 30 By Interest A/c 114.38
10 1
4,17,500 x x
100 365
April 30 By Balance c/d 2,385.62
26,000 6,70,000 26,000 6,70,000

No entry is required for matured bill on 10th April since party is not contracted.
7.2.4 Method 3: Preparation of Account Current by Means of Product of Balances in case of Banks.
This method, also known as periodic balance method, is usually adopted in the case of banks where the
balance of account is taken out after every transaction. In this case, the number of days written against each
transaction are the days counted from its date or due date to the date of the following transaction. In the
case of the last transaction, the number of days is counted to the close of the period.
Each amount is multiplied with the number of days. If the amount represents a debit balance, the product
is entered in the Dr. Product column; and if it represents a credit balance, the product is written in the Cr.
Product column. The Dr. Product and Cr. Product columns are then totalled up. Interest is calculated on each
total at the given rate of interest; and the net interest is ascertained. If net interest is payable to the customer,
it will appear as “By Interest A/c”, and if it is due from the customer, it will appear as “To Interest A/c”.

? ILLUSTRATION 6

On 2nd January, 2016 Vinod opened a current account with the Allahabad Bank Limited; and deposited a sum of
` 30,000.

He further deposited the following amounts: `

th
15 January 12,000
12th March 8,000
th
10 May 16,000

His withdrawals were as follows :

15th February 26,000
th
10 April 30,000
th
15 June 14,000
Show Vinod’s a/c in the ledger of the Allahabad Bank. Interest is to be calculated at 5% on the debit balance and
2% on credit balance. The account to be prepared as on 30th June, 2016. Calculation may be made correct to the
nearest rupee.

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 ACCOUNTING FOR SPECIAL TRANSACTIONS 6.159

 SOLUTION
Vinod Current Account with Allahabad Bank Ltd.
Date Particular Dr. Cr. Dr. or Cr. Balance Days Dr. Product Cr. Product

2016

Jan. 2 By Cash Account - 30,000 Cr. 30,000 13 - 3,90,000

Jan. 15 By Cash Account - 12,000 Cr. 42,000 31 - 13,02,000

Feb. 15 To Self 26,000 - Cr. 16,000 25 - 4,00,000

Mar. 12 By Cash Account - 8,000 Cr. 24,000 29 - 6,96,000

April 10 To Self 30,000 - Dr. 6,000 30 1,80,000 -

May 10 By Cash Account - 16,000 Cr. 10,000 36 - 3,60,000

June 15 To Self 14,000 - Dr. 4,000 16 64,000 -

June 30 By Interest A/c - 140 Dr. 3,860 - -

June 30 By Balance c/d 3,860 -

70,000 70,000 2,44,000 31,48,000

July 1 To Balance b/d 3,860

* Interest is calculated as follows:

On ` 31,48,000 @ 2% for 1 day = ` 172.49
On ` 2,44,000 @ 5% for 1 day = ` 33.42
Net Interest = ` 139.07 (` 172.49- ` 33.42)

SUMMARY
w When interest calculation becomes an integral part of the account. The account maintained is called
“Account Current”.
Some examples where it is maintained are:
(i) Frequent transactions between two parties.
(ii) Goods sent on consignment
(iii) Frequent transactions between a banker and his customers
(iv) In case of Joint venture when no separate set of books is maintained for joint venture
w There are three ways of preparing an Account Current :
(i) With the help of interest tables
(ii) By means of products
(iii) By means of products of balances

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 6.160 PRINCIPLES AND PRACTICE OF ACCOUNTING

TEST YOUR KNOWLEDGE

Multiple Choice Questions
1 Red ink interest is
(a) really not interest
(b) negative interest
(c) used in connection with average due date.
2 An account current is a statement of mutual transactions
(a) between two parties
(b) in lieu of average due date
(c) prepared for a particular accounting period.
3 In account current, while counting the number of days, the due date is ignored and date up to
which the accounts are prepared, is
(a) included (b) excluded (c) ignored

Theoretical Questions
1. Define Account Current. Explain ways of preparing an Account Current
2. Write short note on Red-ink interest.
Practical Questions
1. Roshan has a current account with partnership firm. It has debit balance of ` 75,000 as on 01-07-2016.
He has further deposited the following amounts:
Date Amount (`)
14-07-2016 1,38,000
18-08-2016 22,000
He withdrew the following amounts :
Date Amount (`)
29-07-2016 97,000
09-09-2016 11,000
Show Roshan’s A/c in the ledger of the firm. Interest is to be calculated at 10% on debit balance and 8% on
credit balance. You are required to prepare current account as on 30th September, 2016 by means of product
of balances method.
2. From the following particulars prepare a account current, as sent by Mr. Ram to Mr. Siva as on 31st
October 2016 by means of product method charging interest @ 5% p.a.

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 ACCOUNTING FOR SPECIAL TRANSACTIONS 6.161

2016 Particulars `
1st July Balance due from Siva 750
15th August Sold goods to Siva 1250
20th August Goods returned by Siva 200
22nd Sep Siva paid by cheque 800
15th Oct Received cash from Siva 500
ANSWERS/HINTS
MCQs
1. (b) 2. (a) 3. (a)
Theoretical Questions
1. An Account Current is a running statement of transactions between parties for a given period of time
and includes interest allowed or charged on various items. It takes the form of an ledger account.
There are three ways of preparing an Account Current:
(i) With help of interest table.
(ii) By means of products.
(iii) By means of products of balances.
2. In case the due date of a bill falls after the date of closing the account, then no interest is allowed for that.
However, interest from the date of closing to such due date is written in “Red-Ink” in the appropriate
side of the ‘Account current’. This interest is called Red-Ink interest. This Red Ink interest is treated as
negative interest. In actual practice, however the product of such bill [value of bill X (due date-closing
date) is written in ordinary ink in the opposite side on which the bill is entered]. It means interest from
future date from date of account current i.e., present date. In earlier periods, it was written in red ink;
hence it got the name of red ink interest. It implies that rebate will be allowed on interest paid/ received,
if settlement of future due transaction is done on account current date

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 6.162 PRINCIPLES AND PRACTICE OF ACCOUNTING

Practical Questions
Answers 1
Roshan’s Current Account with Partnership firm (as on 30.9.2016)

Date Particulars Dr Cr Balance Dr. Days Dr Cr

or Product Product
(`) (`) (`) Cr. (`) (`)
01.07.16 To Bal b/d 75,000 75,000 Dr. 13 9,75,000
14.07.16 By Cash A/c 1,38,000 63,000 Cr. 15 9,45,000
29.07.16 To Self 97,000 34,000 Dr. 20 6,80,000
18.08.16 By Cash A/c 22,000 12,000 Dr. 22 2,64,000
09.09.16 To Self 11,000 23,000 Dr. 22 5,06,000
30.09.16 To Interest A/c 457 23,457 Dr.
30.09.16 By Bal. c/d 23,457
1,83,457 1,83,457 24,25,000 9,45,000
Interest Calculation:

On ` 24,25,000x 10% x 1/365 = 664

On ` 9,45,000 x 8% x 1/365 = (` 207)
Net interest to be debited = (` 457)
Answers 2
Siva in Account Current with Ram as on 31st Oct, 2016

` Days Product ` Days Product

(`) (`)
01.07.16 To Bal. b/d 750 123 92,250 20.08.16 By Sales 200 72 14,400
Returns
15.8.16 To Sales 1,250 77 96,250 22.09.16 By Bank 800 39 31,200
31.10.16 To Interest 18.48 15.10.16 By Cash 500 16 8,000
By Balance of 1,34,900
Products
31.10.16 By Bal. c/d 518.48
2018.48 1,88,500 2018.48 1,88,500

5 1
Interest = ` 1,34,900 x x = ` 18.48
100 365

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