7.3.6.1 Examples of Average Balance Computation

Here are some examples that illustrate the concepts of average balance computation. These examples show how the application calculates period, monthly average balances.

Monthly Average-to-Date Balances

In this example, the ending balance in an account on July 20th is 100,000 (USD). Here are the daily activity, end-of-day (EOD), period-to-date (PTD) aggregate, and monthly average balances for the first three days in August.

Table 7-12 Monthly Average Balances for June

Date	Daily Activity	End of Day	Monthly Aggregate	Monthly Average Balance
June 1	5000	105,000	105,000	105,000
June 2	8000	113,000	218,000	109,000
June 3	4000	117,000	335,000	111,667.67

This shows how the Monthly Average balance is calculated by taking the Monthly Aggregate Balance and dividing it by the Days in Period to Date. In this example, we calculate the average balance over the first three days of June. Each day’s EOD balance is added to the Monthly Aggregate, and the Average balance is updated accordingly.

Note:

Monthly average balances reset to zero at the beginning of each period.

Effective Date Handling

The effective date of transactions directly affects average balance calculations, as these balances are based on the transaction's effective date. This date is also crucial when choosing inquiry or reporting criteria, since reports will show average balances as of the selected effective date.

Backdated Transactions and Average Balances

When you post a backdated transaction, the application adjusts the end-of-day and aggregate balances of the affected accounts, as of the effective date and all subsequent dates.The following example continues the general example and illustrates what happens when you post a backdated transaction. Here are the end-of-day and aggregate balances from the example previously described in the Example of Average Balance computation section.

Day	Account A End-of-Day	Account A Aggregate	Account B End-of-Day	Account B Aggregate	Account C End-of-Day	Account C Aggregate
Day 1	1,000	1,000	(1,000)	(1,000)	0	0
Day 2	1,100	2,100	(1,000)	(2,000)	(100)	(100)
Day 3	1,100	3,200	(800)	(,2,800)	(300)	(400)

Here's the average balance for each account on Day 3.

Account	Calculation	Average Balance
Account A	3,200 / 3	1,066.66
Account B	(2,800) / 3	(933.33)
Account C	(400) / 3	(133.33)

Now assume that the following backdated transaction occurs on Day 3, with an effective date of Day 1.

Account	Debit	Credit
Account A	500
Account B	500

The effects of the backdated transaction are shown in the following table.

Day	Account A End-of-Day	Account A Aggregate	Account B End-of-Day	Account B Aggregate	Account C End-of-Day	Account C Aggregate
Day 1	1,500	1,500	(1,500)	(1,500)	0	0
Day 2	1,600	3,100	(1,500)	(3,000)	(100)	(100)
Day 3	1,600	4,700	(1,300)	(4,300)	(300)	(400)

Here's the average balance now for each account on Day 3.

Account	Calculation	Average Balance
Account A	4,700 / 3	1,566.66
Account B	(4,300) / 3	(1,433.33)
Account C	(400) / 3	(133.33)