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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

In the formula for calculating interest, how is time computed?

To determine

State the way in which the time is computed in the formula for calculating interest.

Explanation

Rate of interest:

The amount of interest charged on note is known as rate of interest.

In order to calculate the time, term of the note is used which is stated as the fraction of a year. Hence, if the term of the note is specified in months, then the time is computed depending upon the months and if the term of the note is specified in days, then the number of exact days are counted from the date of issue of note till the maturity date to compute the time.

For example, a four-month note issued on June 1 is payable on October 1, in this case, the time is calculated on the following bases...

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