Step 1: Convert Original Gross Scores to Adjusted Gross Scores
To arrive at an Adjusted Gross Score, you use the USGA's Equitable Stroke Control (ESC). ESC is used to downwardly adjust individual hole scores for handicapping purposes in order to create handicaps that better represent a golfer's playing ability. ESC imposes a maximum number of strokes that can be entered for any given hole. This maximum is based on the golfer's Course Handicap and is obtained from the table shown below.
Course Handicap 
Maximum Score 
9 or less 
double bogey 
10 through 19 
7 
20 through 29 
8 
30 through 39 
9 
40 and above 
10 
An example of a downward adjustment may be helpful. Let's say that a player with a Course Handicap of 18 scores a nine on one of the holes. His nine would be downwardly adjusted to a seven because players with handicaps in the 10 to 19 range are allowed a maximum score of seven on any given hole. Once you make adjustments, if necessary, to all eighteen holes, the sum of these 18 holes is the Adjusted Gross Score.
Step 2: Calculate Handicap Differentials for Each Score
The second step in computing a Handicap Index is to compute a Handicap Differential for each score that is to be considered in the Handicap Index calculation. The Handicap Differential is computed using the following formula:
(The Course Rating is what the USGA deems a scratch golfer would score on a course under normal playing conditions. A Slope Rating of 113 is for a course of standard difficulty according to the USGA.)
Round the Handicap Differential to the nearest tenth (i.e., 17.25=17.3, 11.34=11.3, etc.).
Step 3: Select Best, or Lowest, Handicap Differentials
The third step in calculating your Handicap Index is to select the lowest Handicap Differentials. The following table is used when selecting the best, or lowest, Handicap Differentials. If more than 20 scores have been entered, the 10 best differentials of the 20 most recent scores are used for the calculation.
Number of Handicap 
Differentials Used 
5 or 6 
Lowest 1 
7 or 8 
Lowest 2 
9 or 10 
Lowest 3 
11 or 12 
Lowest 4 
13 or 14 
Lowest 5 
15 or 16 
Lowest 6 
17 
Lowest 7 
18 
Lowest 8 
19 
Lowest 9 
20 
Lowest 10 
The USGA does not calculate a handicap until five scores have been recorded.
Step 4: Calculate the Average of the Lowest Handicap Differentials
If there are 10 Handicap Differentials (scores) available, calculate the average for the lowest, or best, 3 Handicap Differentials. If there are 15 Handicap Differentials (scores) available, calculate the average for the lowest, or best, 6 Handicap Differentials. Once a player has at least 20 scores, always use the 10 best, or lowest, Handicap Differentials from the most recent 20 scores.
Step 5: Multiply Average of Handicap Differentials by 0.96 or 96%
The fifth step in calculating the Handicap Index is to compute the net Handicap Differential average. For the USGA the percentage by which the Handicap Differential averages are multiplied is 96%.
Step 6: Truncate, or Delete, Numbers to the Right of Tenths
Step six in computing the Handicap Index, is to delete the digits after the tenths for the number derived in Step 5. Do NOT round off to the nearest tenths place. As established by the USGA, the default maximum Handicap Index on an 18hole course is 36.4 for males and 40.4 for females. On a ninehole course the default maximum Handicap Index is 18.2 for males and 20.2 for females. The maximum ceiling can be increased.
Example of a Handicap Index Calculation
The following is an example of how the Handicap Index is calculated using the USGA System. This example assumes only 14 scores have been posted for this golfer.
Sum of the lowest five Handicap Differentials: 68.7
Average of lowest Handicap Differentials (68.7 divided by 5): 13.74
Handicap Differential Average multiplied by 96%: 13.1904
Truncate (delete) digits after tenths place: 13.1
Handicap Index: 13.1
Step 7: Calculate Course Handicap
The final step is to calculate a Course Handicap. A Course Handicap is the number of strokes a player receives on each particular course. Determine a course handicap by multiplying the Handicap Index by the Slope Rating (from the course and tee you choose) and dividing by 113 (standard difficulty rating). Round the result to the nearest whole number.
Course Handicap = Index x (Slope Rating of Tee on Course / 113)
Example of a Course Handicap Calculation
The following assumes an index of 12.5 and a Home course slope of 120.
Course Handicap 
= 12.5 x 120 / 113 

= 1500 / 113 

= 13.27 

= 13 
For 9hole handicaps, you can follow this formula replacing the 18hole Course Rating with a 9hole Course Rating. The Slope is the same for 18 and 9 hole calculations.
You've now seen how all the pieces of the puzzle fit together for calculating a Handicap Index and Course Handicap. You've picked up or refreshed your memory on some golf handicap terminology. You've noted that none of the calculations is magical, but simple math. If you are interested in more information, you can always read through the current USGA Handicap Manual on their website (USGA.org).