Justification for red ink interest on bill receivable
This query is : Resolved
Quick Summary
22 April 2020
Sir, we charge red ink interest if due date is falling after statement date. However my query arises when red ink interest is calculated on bill receivable, whose due date is after statement date. Therefore we calculate negative interest, which in fact, means we are debiting the debtor's account. If our assumption is that he is making payment on statement date, he should earn rebate for early payment of the bill. But due to interest being in negative, we actually debited his account. Therefore he is paying extra even though he is paying early. I could not understand the logic behind it, or is my concept about red ink interest is flawed. Thank you very much in case you answered.
Thank you.
Thank you.
07 May 2020
The thing to be noted here is that we are calculating the Red Ink Interest as on a particular date and where there are still days remain to have the bills become due for the customers. When the bills become due there is no question of paying for the Interest part as on the due date of invoice you you calculate Red Ink Interest, it will be ZERO only. It has some amount only if we are calculating the same before the due date of invoice to records in our books of accounts. It will be automatically zero as on the due date of invoice.
Hope this is clear now.
Hope this is clear now.
Message likes :
1 times
07 May 2020
The thing to be noted here is that we are calculating the Red Ink Interest as on a particular date and where there are still days remain to have the bills become due for the customers. When the bills become due there is no question of paying for the Interest part as on the due date of invoice you you calculate Red Ink Interest, it will be ZERO only. It has some amount only if we are calculating the same before the due date of invoice to records in our books of accounts. It will be automatically zero as on the due date of invoice.
Hope this is clear now.
Hope this is clear now.
Message likes :
1 times
14 June 2020
The thing to be noted here is that we are calculating the Red Ink Interest as on a particular date and where there are still days remain to have the bills become due for the customers. When the bills become due there is no question of paying for the Interest part as on the due date of invoice you you calculate Red Ink Interest, it will be ZERO only. It has some amount only if we are calculating the same before the due date of invoice to records in our books of accounts. It will be automatically zero as on the due date of invoice. Hope this is clear now.
Message likes :
1 times
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