AVERAGING ACCOUNTS.

Example 3. To find cash balance in Example 1 on Aug. 12.

Discount at 5 p.c. p.a.

Aug. 12 to Nov. 10 is 90 days.

Discount on £1069-668 for 90 days at 5 p.c.= £13·187.

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Example 4. To find cash balance on March 10, 1890, in

Example 2.

Interest at 5 p.c. p.a.

Balance of products is in favour of debtor side.

added.

73 | 2195-92425 | 30-081

5.92
84
11

56575.380

.. Interest is

Example 5. Monthly statements.

To find cash balance at end of September on this account.

1. Find equated time for the following accounts.

(1) To goods, May 9, 6 mos. £412. 178. 6d.
To goods, June 3, 4 mos. £351. 8s. 9d.
To goods, July 4, 3 mos. £612. 138. 7d.
To goods, Aug. 7, 4 mos. £506. 88. 8d.

(2) To merchandise, Feb. 20,

5 mos. £364. 88. 7d.

To merchandise, March 11, 4 mos. £512. 78. 6d.
To merchandise, April 4, 3 mos. £416. 88. 4d.
To merchandise, June 6, 1 mo. £1000. Os. Od.
(3) To goods, May 4, 4 mos. £5126.
To goods, June 5, 4 mos. £7184.
To goods, July 8, 4 mos. £9651.
To goods, Aug. 9, 4 mos. £7364.
(4) To goods, May 1, 5 mos. £764. 10s. Od.
To goods, May 1, 3 mos. £865. 58. Od.
To goods, May 1, 4 mos. £900. 6s. 8d.
To goods, May 1, 6 mos. £600. Os. Od.

EXAMPLES.

3 mos. £651. 10s. 6d.
4 mos. £840. Os. Od.
2 mos. £712. 13s. 4d.

(5) To merchandise, Jan. 6,
To merchandise, Feb. 10,
To merchandise, Ap. 9,
To merchandise, May 12, 3 mos. £1500. Os. Od.
To merchandise, June 10, 4 mos. £940. 12s. 6d.

207

2. Average and find the cash balances on the following accounts.

(1) 1889. Dr.

Mar. 16, To goods, 3 mos. £580. 17s. 93d.
Ap. 12, To goods, 4 mos. £708. 10s. Od.
May 10, To goods, 4 mos. £952. Os. Od.
1889. Cr.

May 7, By cash, £640. 8s. 7d.
June 3, By cash, £312. 9s. 6d.
Aug. 5, By cash, £700. Os. Od.
Cash Balance due on Aug. 20.

(2) 1890. Dr.

Jan. 19, To merchandise, 5 mos. £657.
Feb. 7, To merchandise, 3 mos. £840.
April 8, To merchandise, 4 mos. £1725.
May 19, To merchandise, 4 mos. £961.
1890. Cr.

Feb. 5, By cash, £500.
March 30, By cash, £700.
April 30, By cash, £1000.
June 6,
By cash, £1200.

Cash Balance due on June 30.

(3) 1892. Dr.

Jan. 18, To goods, 4 mos. £782. 6s. 6d.
Feb. 20,
To goods, 2 mos. £814. 5s. 10d.
March 10, To goods, 3 mos. £900. 7s. 6d.
April 30, To goods, 6 mos. £654. 8s. Od.
May 15, To goods, 3 mos. £500. Os. Od.

1892. Cr.
Feb. 1,
By cash, £1000.
March 3, By cash, £500.
April 28, By cash, £700.
May 12, By cash, £630.
June 4, By cash, £400.

Cash Balance due on June 10.

(4) Average and balance the above accounts when Dr.

and Cr. dates are these:

3. Draw up the monthly statements of these transactions. "To goods."

(1) Jan. 3, £812. Jan. 5, £750. Jan. 9, £624. Jan. 13, £500. Jan. 23, £816. Jan. 27, £914.

Find cash balance, (interest at 5 p.c. p.a.) at end of month.

(2) May 1, £712. 10s. May 5, £847. May 12, £623. 7s. 6d. May 17, £500. May 22, £863. May 27, £914. 78. 8d. Cash balance on May 31, at 5 p.c. p.a.

5. Partial Payments or Payments on Account.

Partial payments are frequently made either before or after a bill or account is due-if before, discount is allowed; if after, interest is charged. In the case of bonds and other interest-bearing obligations the payments are usually indorsed on the back.

Bankers are constantly loaning money for profitin partial payments they reckon amount of debt + interest to date of partial payment, then strike off the payment and difference is new principal. Similarly in

TRADE DISCOUNT.

209

the case of banks which give interest on current account as money is drawn or put in the difference in sum becomes the new principal. Interest however is not added in but put into a further column for addition at the end of the half-year-this interest is calculated for the time that any temporary principal remains unchanged at the current rate of interest.

Merchants and traders charge and allow the same rate of interest on both sides of the account.

Commercial discount is a percentage struck off a debt and not off the money paid for cash or payment before the debt is due.

The terms of an agreement may include discount within certain days.

Hence in the case of an account when partial payments are made within the time or times on which discounts are allowed the value of these partial payments is increased, i.e. a given payment will pay off more debt owing to the discount granted-this is always placed to the credit of the debtor (Example 4).

Example 1. A bank lends a customer £1000 on March 5, 1890– the customer pays £250 on June 3, £300 on Sept. 24-find cash balance on Dec. 31.

Interest 10 p.c. p.a.

Interest on £1000 for 90 days at 10 p.c.2000=188o= £24-657.

73 1800 24.657

366

340

480

420

550

1000

24.657

1024.657

250

New principal 774 657 on June 3.