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.
The dues of Kabir is to be paid in 4 yearly installment. The amount of each installment will be:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → ₹25,000
When the amount due to a retiring partner is paid in equal yearly instalments plus interest, the instalment is only the principal split equally; the interest on the unpaid balance is paid over and above it.
Amount due to Kabir = ₹1,00,000
Number of yearly instalments = 4
Each instalment = ₹1,00,000 ÷ 4 = ₹25,000
₹37,000 and ₹34,000 are the totals of the first and second payments once interest is added, not the instalment of principal.
NCERT (2026-27 edition):
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