Answer the questions from based on following paragraph.
Preeti, Kabir and Shershah are partners in a firm. Kabir retires from the firm. On his date of retirement, ₹1,00,000 became due to him. Preeti and Shershah promised to pay him in four yearly equal installments plus interest @ 12% p.a. on the unpaid balance every year at the end of the year, to which he agreed.
Net Amount of installment payable at the end of 2nd year to Kabir is:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → ₹34,000
Interest is charged at 12% on the balance still unpaid at the start of each year, and it is paid with that year’s instalment of ₹25,000.
Year 1:
Balance = ₹1,00,000; interest = ₹12,000; payment = ₹25,000 + ₹12,000 = ₹37,000
Balance carried to Year 2 = ₹1,00,000 − ₹25,000 = ₹75,000
Year 2:
Interest = ₹75,000 × 12% = ₹9,000
Payment = ₹25,000 + ₹9,000 = ₹34,000
₹37,000 is the first year’s payment, when interest is still on the full ₹1,00,000.
NCERT (2026-27 edition):
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