The entries in an SB account pass book are given below. Calculate the interest at 4% per annum for the month on daily product basis.
Date Particulars Cheque no. Debit Credit Balance
01-01-2009 Balance B/F 6400.00
05-01-2009 By cash 2200.00 8600.00
10-01-2009 To cheque 945800 1250.00 7350.00
21-01-2009 By cash 7800.00 15150.00
27-01-2009 By cheque 663119 750.00 15900.00
30-01-2009 To cheque 124322 2100.00 13800.00

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Solution

To calculate the interest on daily product basis, we have to consider the balance at the end of each day and find interest for those days. We can do this by calculating the daily product for the month and finding the interest at the given rate for one day. We do this as follows:
Rs. $6400$ for $4$ days: $6400 \times 4 =$ Rs. $25, 600$ (because there were Rs. $6400$ from 1st to 5th)
Rs. $8600$ for $5$ days: $8600 \times 5 =$ Rs. $43, 000$
Rs. $7350$ for $11$ days: $7350 \times 11 =$ Rs. $80, 850$
Rs. $15150$ for $6$ days: $15150 \times 6 =$ Rs. $90, 900$
Rs. $15900$ for $3$ days: $15900 \times 3 =$ Rs. $47, 700$
Rs. $13800$ for $2$ days: $13800 \times 2 =$ Rs. $27, 600$
Adding these we get the product for the month. Thus product for the month $=$ Rs. $315, 650$ and T $= 1$ day $= 1 / 365$ years.
Interest for the month $= \frac{315650 \times 4}{100 \times 365} = 34.59$
Therefore the interest for the month is Rs. $35$ .

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