It is a running statement of transaction between parties for a given period of time which is used for calculation of net interest payable or receivable.
It is in the form of account given below:
X in account current with Y.
Dr. cr.
Methods of account current current
Interest table method
Under this method interest will be calculated for each transaction in above format.
Instead of product column, interest column will be prepared.
This method is used when there is a higher value transactions
Product method:
Under this method interest on netproduct will be calculated.
Net product = Dr. product- Cr. Product
Interest of the product will be written at the reverse side of cr product.
So that we can calculate correct amount due or payable.
This method is used in industries like oil and sugar etc.
Product of balance method:
Under this method instead of net product at the end of period, product will be calculated at the time of each transaction.
This method is used in banking sector.
Under this method, interest on debit product and interest on credit product will be calculated separately because rate of interest on debit and credit product will be different.
Net interest will be recorded in the account holder as per nature of balance, if net product of debit side is higher, interest will be recorded at debit side otherwise credit side.
Red ink interest:
When due date falls after closing of account, at the date of closing we have no liability to pay, so product of such transaction will save interest product of such transaction.
It can be recorded as negative on same side or at reverse side of the account.
Earlier in manual system such transaction were written with red ink so it is called Red ink interest.
In no information is given date of sales return or purchase return, treat similar to purchase or sale date.