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What will be the interest for one year on a loan of ₹50,000 given to the firm by a retiring partner at 8% per annum?

Answer and explanation

Correct answer: ₹4,000

One-year interest = Principal × Rate × Time = ₹50,000 × 8/100 × 1 = ₹4,000. Therefore, ₹4,000 will be payable as interest in the partner’s loan account for one year. The amounts ₹3,500 and ₹4,500 correspond to rates other than 8%, so they are incorrect. Exam tip: When the rate is annual and the period is one year, calculate the interest directly as 8% of the principal.

Related tags

Partner Loan AccountRetirement Of PartnerInterest CalculationReconstitution Of PartnershipPartner's Loan AccountPartner S Loan AccountReconstitution Retirement Or Death Of A PartnerAccountancy

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