https://help.tallysolutions.com/docs/te9rel64/Advanced_Features/Advanced_Accounting_Features/Int_Calc_to_incl_excl_date_of_transaction.htm

Including/excluding date of transaction for interest calculation

The option Include transaction date for interest calculations: For amounts added, For amounts deducted is provided in the Interest Parameters screen. This option allows you to exclude or include the transaction date for amounts added and deducted.

For example , for debtor ledger, there was an invoice raised for Rs.50,000 on 1st of April’16 against which an amount of Rs.20000 was received on the same day. Now the user may want to include the invoice amount and exclude the received amount, for the purpose of interest calculation on 1st April’16.

You can use the options as shown below:

For amounts deducted

For amounts added

Yes

No

Yes

Includes both the additions and deductions on the transaction date to the amount. Interest is calculated after considering the amount of the transaction date.

The additions done on the transaction date will be considered from the next day onwards, whereas, the deductions are considered on the transaction date for interest calculations.

No

The additions are included on the transaction date and the deductions are  excluded for interest calculations on the transaction date. The interest on the deductions is calculated on the next day.

Excludes both the additions and deductions on the transaction date. The interest is calculated on the net amount from the next day.

Illustration:

Consider the following scenario:

ABC Debtor has the following transactions:

Opening Balance - Rs.50,000 Dr.

1st Apr’16- Sales - Rs. 20000 Dr.

1st Apr’16-Receipt- Rs. 10000 Cr.

In the Interest Parameters screen,

1. When the additions and deductions are included with,

o For amounts added ? set to No

o For amounts deducted ? set to No

The addition amount of Rs.20000, and the deduction amount of Rs. 10000  will not be considered for calculating interest on 1st Apr’16. Therefore, the interest will be calculated on Rs. 50,000, which the is the opening balance as on 1st Apr'16.

2. When the additions and deductions are included with,

o For amounts added ? set to Yes

o For amounts deducted ? set to Yes

The addition amount of Rs.20000 and the deduction amount of Rs. 10000 will be considered for calculating interest on 1st Apr’16. Therefore, the interest will be calculated on Rs.60000 (50000+20000-10000)

3. When the additions and deductions are included with,

o For amounts added ? set to Yes

o For amounts deducted ? set to No

The addition amount of Rs.20000 will be considered and the deduction amount of Rs. 10000 will not be considered for calculating interest for 1st Apr’16. Therefore, the interest should be calculated on Rs.70000, (i.e., 50000+20000)

4. When the additions and deductions are included with,

o For amounts added ? set to No

o For amounts deducted ? set to Yes

The addition amount of Rs.20000 will not be considered and the deduction amount of Rs. 10000 will be considered for calculating interest for 1st Apr’16. Therefore, the interest will be calculated on Rs.40000, (i.e., 50000-10000)

Note: The terms additions and deductions are used in relation to the opening balance (either zero or any value). When any amount is added to opening balance, it should be treated as addition, and when any amount is reduced from opening balance, it should be treated as deduction. In other words, the ‘interest calculation for the day’ means opening balance + additions – deductions, which is the closing balance of the day.