ArchiOffice Online handles the computation of compound interest. It calculates the compound interest based on the formula:
A = P * ( 1 + r/n )(n * t)
where
A = |
Total Amount (including interest) |
P = |
Principal Amount (the initial amount borrowed or deposited) |
r = |
Annual Rate of Interest |
n = |
Number of times the interest is compounded in a year |
t = |
Time (period for which an amount is deposited or borrowed) |
You can understand the calculation of compound interest in ArchiOffice Online from this example:
1. Select a project and specify the Compound Interest Term and Rate on the Projects > Billing > Options screen.
2. Create an invoice for this project with invoice amount $10 and invoice date 02/02/2016 and then finalize it.
3. Create another invoice with an invoice amount $0 (for easier calculation) and date as
07/27/2016.
Here is the calculation of compound interest for these two invoices: $10 and $0.49.
Calculation
For the invoice of $10:
Paid Amount = $0
Unpaid amount= $10
Balance = $10
Interest Term = 30 (set at project level)
Interest Rate = 10% (set at project level)
First invoice date = 02/02/2016
Second invoice date = 07/27/2016
Number of days between 02/02/2016 and 07/27/2016 = 176
P = Balance = 10
t = 175/365 = 0.482191780
n= 365/Interest Term = 365/30 = 12.1666666
r = Interest Rate/100 = 10/100 = 0.1
According to the formula,
A = P * ( 1 + r/n )(n * t)
= 10 * (1 + 0.1/12.1666)(12.1666 * 0.4821)
= 10 * (1.00821)5.8655
= 10.49127
As A is the total amount including interest,
Compound Interest = A - P
= 10.49127-10
= 0.49