Aditya, Biral and Mukul are partners in a firm. On the date of retirement of Mukul, Rs. 6,00,000 becomes due to him. Aditya and Biral promised to pay him the amount due. Payment is made in three yearly installments of Rs. 2,00,000 each including interest @ 12% p.a. on the outstanding balance during the first three years and the balance including interest in the fourth year. Opening balance of Mukul's loan account in the beginning of second year, third year, and fourth year would be:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 4,72,000 ; Rs. 3,28,640 ; and Rs. 1,68,077 respectively
When the amount due to a retiring partner is transferred to his loan account and paid in instalments that include interest, each year’s interest is first added to the balance at the start of the year, and the instalment is then paid out of the total. Only the part of the instalment beyond the interest reduces the loan.
Year 1:
Interest = Rs. 6,00,000 × 12% = Rs. 72,000
Balance = Rs. 6,00,000 + Rs. 72,000 − Rs. 2,00,000 = Rs. 4,72,000 (opening balance of year 2)
Year 2:
Interest = Rs. 4,72,000 × 12% = Rs. 56,640
Balance = Rs. 4,72,000 + Rs. 56,640 − Rs. 2,00,000 = Rs. 3,28,640 (opening balance of year 3)
Year 3:
Interest = Rs. 3,28,640 × 12% = Rs. 39,437 (rounded)
Balance = Rs. 3,28,640 + Rs. 39,437 − Rs. 2,00,000 = Rs. 1,68,077 (opening balance of year 4)
Deducting Rs. 2,00,000 a year from the principal alone, as Option (1) does, ignores the interest that each instalment carries.
Note: NTA picked this question from an NCERT (2026-27) illustration and changed the figures. Do not ignore NCERT while practising numericals.
NCERT (2026-27 edition):
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