Question

    If the due date of a bill is after the closing date of

    accounts, then interest from the date of closing to the due date is written in the appropriate side of the Account Current as ______
    A Red ink interest Correct Answer Incorrect Answer
    B Blue Ink interest Correct Answer Incorrect Answer
    C Green ink interest Correct Answer Incorrect Answer
    D Black ink interest Correct Answer Incorrect Answer
    E Brown ink interest Correct Answer Incorrect Answer

    Solution

    In an Current Account, interest is calculated on the amount of a bill from the date of transaction to the closing date of the period concerned. In case the due date of the bill falls after the closing date of the account, then no interest is allowed for that period. However, it is customarily followed that interest from the date of closing to the due date is written in red ink in the appropriate side of the Account Current. This interest is called Red-Ink Interest. This Red-Ink interest is treated as negative interest.

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