Skip to content
Illustrations · Illustration 11

Q.Amrinder, Mahinder and Joginder are partners in a firm. Mahinder retires from the firm. On his date of retirement, ₹60,000 becomes due to him. Amrinder and Joginder promise to pay him in instalments every year at the end of the year, to which he agreed. Prepare Mahinder's Loan Account in the following cases:
  1. When payment is made in four yearly instalments plus interest @ 12% p.a. on the unpaid balance.
  2. When payment is made in three yearly instalments of ₹20,000 including interest @ 12% p.a. on the outstanding balance during the first three years and the balance including interest in the fourth year.
  3. When payment is made in four equal yearly instalments including interest @ 12% p.a. on the unpaid balance.

Rajasthan RbseTextbookSubjectiveImportance★★★★★
44% · 27/62 Questions
✓ Free question

The ₹60,000 due to Mahinder is carried in a Loan Account earning 12% p.a. Case 1 pays a fixed ₹15,000 principal plus interest each year; case 2 pays ₹20,000 a year (interest first); case 3 pays a level annuity of ₹19,754. All three clear the loan in four years.

Concept

When the firm cannot pay a retiring partner immediately, the amount due is transferred to his Loan Account, which is shown on the liabilities side until settled. Each year interest is credited to the loan (Interest A/c Dr. To Loan A/c) and the instalment paid is debited (Loan A/c Dr. To Bank).

Case 1 — Four equal principal instalments (₹15,000) plus interest

Mahinder's Loan Account

DateParticularsJ.F.Amount (₹)DateParticularsJ.F.Amount (₹)
Year ITo Bank (15,000 + 7,200)22,200Year IBy Mahinder's Capital A/c60,000
To Balance c/d45,000By Interest A/c7,200
67,20067,200
Year IITo Bank (15,000 + 5,400)20,400Year IIBy Balance b/d45,000
To Balance c/d30,000By Interest A/c5,400
50,40050,400
Year IIITo Bank (15,000 + 3,600)18,600Year IIIBy Balance b/d30,000
To Balance c/d15,000By Interest A/c3,600
33,60033,600
Year IVTo Bank (15,000 + 1,800)16,800Year IVBy Balance b/d15,000
By Interest A/c1,800
16,80016,800

Case 2 — Three instalments of ₹20,000, balance in year IV

Mahinder's Loan Account

DateParticularsJ.F.Amount (₹)DateParticularsJ.F.Amount (₹)
Year ITo Bank20,000Year IBy Mahinder's Capital A/c60,000
To Balance c/d47,200By Interest A/c7,200
67,20067,200
Year IITo Bank20,000Year IIBy Balance b/d47,200
To Balance c/d32,864By Interest A/c5,664
52,86452,864
Year IIITo Bank20,000Year IIIBy Balance b/d32,864
To Balance c/d16,808By Interest A/c3,944
36,80836,808
Year IVTo Bank18,825Year IVBy Balance b/d16,808
By Interest A/c2,017
18,82518,825

Case 3 — Four equal annual instalments (annuity) including interest

The equal instalment = ₹60,000 × 0.329234 (the 4-year, 12% annuity factor) = ₹19,754.

Mahinder's Loan Account

DateParticularsJ.F.Amount (₹)DateParticularsJ.F.Amount (₹)
Year ITo Bank19,754Year IBy Mahinder's Capital A/c60,000
To Balance c/d47,446By Interest A/c7,200
67,20067,200
Year IITo Bank19,754Year IIBy Balance b/d47,446
To Balance c/d33,386By Interest A/c5,694
53,14053,140
Year IIITo Bank19,754Year IIIBy Balance b/d33,386
To Balance c/d17,638By Interest A/c4,006
37,39237,392
Year IVTo Bank19,754Year IVBy Balance b/d17,638
By Interest A/c2,116
19,75419,754
✓Final answer

Case 1: ₹22,200, ₹20,400, ₹18,600, ₹16,800. Case 2: ₹20,000 × 3, then ₹18,825. Case 3: ₹19,754 × 4. The loan is fully settled by the end of year IV in every case.

Unlock everything free for 14 days

  • Full step-by-step solutions
  • Concept-first explanations
  • Methods, shortcuts & mistakes
  • PYQ mapping + timed mock tests

Full access for 14 days. No credit card required.