Average Due Date

What is Average Due Date

The average due date refers to the weighted average of a given number of dates having equal or unequal amounts. It is one equivalent date for various dates so that interest that has to be measured from these respective dates can alternatively be measured from the average due date.

In case a party has to pay various amounts to the same party that are due of different dates and in case they wish to settle the total amount on a fixed date without gaining or losing anything by way or interest is referred to as the average due date. This amount can be due on anything ranging from loans to bills of exchange or any other type of transactions.

What is Maturity of a Bill?

The maturity of a bill or a transaction refers to the date on which the bill of exchange is due to be paid. For calculating this, an additional of 3 days are added as a grace period.

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What is Due Date?

Due date is a date on which transactions such as loan installments, sales, purchases, bills, etc. fall due for the settlement.

How is the Due Date Calculated?

Due date is calculated by adding the bill/credit period on the relevant date + 3 grace days if it is applicable. The relevant dates of bills of exchange can be the date of bill or the date of acceptance according to the terms of the bill. In other cases, it can be the date of the transaction.

The due date of a bill of exchange is calculated for finding the date on which the payment of the transaction or the bill is due. To calculate the due date of the bill of exchange, the steps given below are followed:

  1. The first step is identifying the start date or the base date, which refers to the date wherein the bill of exchange was drawn.

  2. Then the number of days or months are added after which the bill is due for the payment.

  3. And lastly, an additional period of 3 days is added as the grace period.

What is the Effect of Holidays while Ascertaining the Due Date?

  1. Considering the bills of exchange and promissory notes, in case the due date falls on a public holiday, then the due date is considered as the next working day. Sundays are regarded as public holidays.

  2. If there are any emergency holidays, then the subsequent working day is considered to be the due date.

  3. If transactions other than promissory notes and bills of exchange are considered, the due date can be considered on a working day, which is subsequent to the public holiday or the emergency holiday.

FAQs (Frequently Asked Questions)

1. Define Average Due Date and Mention its Uses.

Ans: Average due date refers to the weighted average date of several different due dates for the transactions due between the parties. The average due date can be used in any case when the items of the same kind of nature and between the same parties are represented by one date for the ease of convenience to calculate interest and/or settlement.

The uses of Average Due Date are:

  1. The payments due on different dates by the debtor to the creditor.

  2. The payables and receivables both being due between the parties.

  3. Interest on the drawings that are made on various dates.

  4. The loans that are repayable in equal installments.

  5. The loans that are distributed in equal installments.

2. What is the Process to Calculate the Average Due Date?

Ans: The procedure to calculate the average due date is as follows:

  1. Determine the due dates of all the transactions and bills if not given.

  2. Select a due date as the base date, preferably the one at the earliest. However, any other date apart from the due date can also be taken.

  3. Then calculate the days of the difference between every due date and the base date. In case the due date is prior to the base date, then the days will have a minus sign against them.

  4. The days calculated here are multiplied with the respective amounts of the transactions or bills.

  5. The total of this product is divided by the total amount of the transactions.

  6. The figure that is obtained determines the average due date. This would be days away from the base date but in case there is a minus sign, then it would be days before the base date.

  7. The days would either be added or subtracted from the base date for determining the average due date.