DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : B. VIJAYA KUMAR
Designation : Lecturer
Branch : Commercial & Computer
Practice (CCP)
Institute : GPW/Guntur
Year/Sem : III Sem (C-05)
Subject : ACCOUNTANCY-II
Sub-Code : CCP-302
Topic : ACCOUNT CURRENT
Duration : 50 minutes
Sub Topic : PRODUCT METHOD
Teaching Aids : PPT ANIMATION

CCP302.15
1
Account Current
At the end of this class, you would be able
to know:
(2) Product Method of calculating interest

CCP302.15 2
Reca
p
In the earlier classes, you learnt that there are
FIVE methods for calculation of Interest,
namely:

1. Interest Tables Method

2. Product Method
3. Interest Numbers Method
4. Periodical Balance Method
5. Époque Method

CCP302.15 3
METHODS OF CALCULATING INTEREST

INTEREST PRODUCT INTEREST PERIODICAL EPOQUE

TABLES METHOD NUMBERS BALANCE METHOD
METHOD METHOD METHOD

CCP302.14 4
Recap
 In the “Interest Tables Method”, interest is calculated
for each item from due date of each transaction to date
on which Account Current is prepared

CCP302.15 5
2. Product Method
 CALCULATE No. of DAYS from date of transaction
to the date of preparation of Account Current

MULTIPLY the AMOUNT of each item by NO. OF

DAYS for Interest calculation. YOU will get a
PRODUCT

 This PRODUCT is entered in Product column on

DEBIT and CREDIT sides of Account Current

CCP302.15 6
2. Product Method
 First, BALANCE the PRODUCT columns

 INTEREST calculated on balance of products for

ONE DAY (if period calculated in DAYS) (or)
ONE MONTH (if calculated in MONTHS)

CCP302.15 7
2. Product Method
 Place the INTEREST amount in the “Amount”
column of Debit/Credit side, which has bigger
total of PRODUCTS

CCP302.15 8
2. Product Method

 In other words, Interest is calculated for

ONE DAY on the product of AMOUNT and

DAYS.

CCP302.15 9
2. Product Method
 Based on the SIMPLE FACT that Interest on

AMOUNT for a NUMBER OF DAYS is the SAME

as Interest for ONE DAY on the PRODUCT of

AMOUNT and DAYS.

CCP302.15 10
2. Product Method
Eg1: The following Transactions took place between P and Q
during Jan 1, 2007 and Apr 30. Prepare Account Current
rendered b Q to P on April 30. Rate of Interest 6% p.a.
Rs.
Jan 1 Balance due by P .. 1,850
15 Sold goods to P .. 2,500
25 Received cash from P .. 1,500
Feb 12 Received B/R due 2 months .. 1.800
20 Sold goods to P due by Mar 31 .. 3,500
Mar 15 Purchased goods from P .. 2,000
31 Received cash from P .. 2,000
Apr 15 Sold goods to P .. 2,300

CCP302.15 11
2. Product Method
P in Account Current with Q as on 30th
Dr. April, 2007 Cr.
Date Particulars Amount Days Products Date Particulars Amount Days Products
2007 Rs. Rs. 2007 Rs. Rs.
222000.0 142500.0
Jan-01To balance b/d 1,850.00 120 0 Jan-25By Cash a/c 1,500.00 95 0
262500.0 By B/R (due on
Jan-15To Sales a/c 2,500.00 105 0 Feb-12 Apr 15) 1,800.00 15 27000.00
To Sales (due on 105000.0
Feb-20 Mar 31) 3,500.00 30 0 Mar-15By Purchases a/c 2,000.00 46 92000.00
Apr-15To Sales 2,300.00 15 34500.00 Mar-31By Cash a/c 2,000.00 30 60000.00
To Interest on By balance of 302500.0
Apr-30 Products bal 49.73 Apr-30 Products 0
Apr-30By balance c/d 2899.73
10199.7 624000.0 10199.7 624000.0
3 0 3 0
May-01To balance b/d 2899.73

Interest Calculation: 302500 x 6 =

49.73
365 x 100CCP302.15 12
Summary
 First, BALANCE the PRODUCT columns

 INTEREST calculated on balance of products for

ONE DAY (if period calculated in DAYS) (or)
ONE MONTH (if calculated in MONTHS)

 Place the INTEREST amount in the “Amount”

column of Debit/Credit side, which has bigger
total of PRODUCTS

CCP302.15 13
Quiz
1) Under Products method, Interest on Rs.500/- for
5 days will be the same as on Interest on
Rs.2,500/- for ONE day:

a) False
b) True

CCP302.15 14
Frequently Asked Questions:
1. Define Account Current. Briefly explain the Products
Method of calculating Interest.

2. Write the formulas for interest calculation under

Interest Tables Method and Products Method?

CCP302.15 15
Assignmen
t
1. Ganesh owed to Mani Rs.13,000 on Jan 1, 2008. The
Following transactions took place between them up to April
30. Prepare an Account Current with interest of 6%p.a.

Rs.
2008 Jan 16 Mani sold goods to Ganesh .. 20,000
Jan 29 Ganesh sold goods to Mani .. 11,000
Feb 10 Mani paid cash .. 15,000
Mar 13 Ganesh accepted a bill drawn by
Mani for one month .. 20,000
CCP302.15 16
Assignmen
t2) For more information on this topic, please refer to:
a) “Introduction to Accountancy” by T.S. Grewal
b) “Advanced Accountancy” by Jain & Narang
c) “Introduction to Accountancy” by S.N. Maheswari
d) “Advanced Accountancy” by Shukla & Grewal
e) “Advanced Accountancy” by Gupta & Radhaswamy
f) “Principles & Practice of Book-Keeping” by
Ch. Shanmukhaswamy
g) Any other text book suggested by your teacher
h) Previous years’ exam question papers of SBTET

CCP302.15 17