question on days of year - 360 v 365

Mar 30, 2005 8 Replies

Sorry for the question and if this is the wrong forum - I apologize again :)



Anywho - taking accounting in school - teacher 1 day says that banks use 365 days to figure out the interest and due date for say a notes payable. Next class she says it is 360. Which is the accepted version and which should I apply? I have been using 365 days because I find it hard to believe that a bank would issue a note say on March 10 due in 180 days - my calculation by actual days - 180 days from March 10 comes due September 6. But if we use the 360 days a year - then the answer would be September 10. Thanks for any help/advice.



Paul


for your class the accepted version is the one the teacher wants! Banks at one time used a "360 day" year (before computers!) but I think all loans, notes, etc. are now 365 days. Also, the interest is calculated based on days but the due date remains the same for both methods.

Paul,

I was a commercial loan officer from 1977 to 1982, that's before the days when the computer calculated everything. We did it all manually. We always used the 365 day year (even for leap years):

days / 365 * annual rate * loan amount = interest accrued

As you have been counseled, in school, the correct answer (to get the highest grade) is the one the teacher wants. As you will learn, truth exists quite independently of what is taught in school.

Good luck,

Arnold

Paw wrote:

Agreed

In my Actt 101 class last fall the teacher made us use

360 days. Weird huh

Depending on the currency, banks use different days in year locally for GBP AUD 365, for USD EUR 360 but in the euromarkets (eg. AUD in Europe) normally 360.

Confused?

To confuse the issue even more, sometimes 365.25 is used to account for leap years.

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