Average due date

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siri (Querist)
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16 October 2011 hi sir/madam

in average due date it is said that its the date of settlement where both creditor and debtor dont loose or gain any interest.. can you explain the logic of loosing or gaining interest so that i understand the reason for calculating the ADD.

Thanking you

sirish

CA SUMiT PATWARi

CA SUMiT PATWARi (Expert)
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16 October 2011 Eg : Credit policy of seller is 30 days credit while the payment policy of a customer is 60 days credit. Hence, if seller/supplier is paid after 60 days he will be at a disadvantage and if the customer is asked to pay in 30 days then he will be at a disadvantage.
So the average due date where none of them lose/gain any interest is 45 days(parity in due date wrt the credit terms of both the parties).