Essay: The Adjusted Balance

Sample Essay

The interest in adjusted balance method is also calculated using the same formula but this time the applied balance is the adjusted balance which is the difference between the opening balance and the payments made during the period.

Adjusted balance = Opening balance – payments

Adjusted balance = 600 – 200 = $400

Interest amount = Adjusted balance x daily periodic rate x days in billing cycle

Interest amount = 400 x 0.066% x 30 = $7.92

If Nancy Tai could go back in time and have the option of selecting a method from among the three methods she should select the adjusted balance method for calculating interest as the total amount of interest is lowest and is calculated on adjusted balances instead of daily or previous month balances. Thus it is concluded that the adjusted balance method is the most viable method for accruing and paying interest on credit facilities.

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