Finance charge calculation
Accounting CS uses the following formula to calculate the finance charge amount.
Finance charge =
Daily Rate * Number of days outstandingDaily Rate
= (Invoice open amount * Finance charge rate)/ Number of days in the yearNumber of days outstanding:
- If using the transaction date (for Invoice and Finance charge type transactions):Number of days outstanding = Finance charge date - Transaction date
- If using the due date (for Invoice and Finance charge type transactions):Number of days outstanding = Finance charge date - Due date
- For previously assessed transactions:Number of days outstanding = Finance charge date - Date fee was last assessed
Example
Finance charge rate
: 18%Invoice date
: 4/30/11, Due date
: 05/31/11, Grace period
: 0 daysInvoice open balance:
$500.00Daily rate calculation:
($500 * 0.18) / 365 = 0.2466- Using the transaction date:
- If the finance charge date is 07/1/11:Number of days outstanding (7/1/11 - 4/30/11) = 61 daysFinance charge amount = 0.2466 * 61 = $15.04
- If the finance charge date 08/1/11:Number of days outstanding (8/1/11 - 7/1/11) = 31 daysFinance charge amount = 0.2466 * 31 = $7.64
- Using the due date:
- If the finance charge date is 07/1/11:Days outstanding (7/1/11 - 5/31/11) = 31 daysFinance charge amount = 0.2466 * 31 = $7.64
- If the finance charge date is 08/1/11:Days outstanding (8/1/11 - 7/1/11) = 31 daysFinance charge amount = 0.2466 * 31 = $7.64
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