Question

Gopal, Heera and Iqbal were partners in a firm sharing profits and losses equally. Iqbal died on 1st April, 2022. Final dues payable to Iqbal\u2019s executor as on the date of death amounted to \u20b9 4,00,000. Starting from 31st March, 2023, the executor was to be paid in two equal annual instalments of \u20b9 2,00,000 each, with interest @ 10% per annum. Accounts were closed on 31st March every year. Prepare Iqbal\u2019s executor\u2019s account till the final payment is made.

Hint:

When paying executors in instalments, calculate yearly interest on the opening balance and add it before recording the payment.

Answer 1

Step 1: Basic Data

Total amount due on 1st April, 2022 = ₹4,00,000

To be paid in 2 equal annual instalments of ₹2,00,000 each

Interest @ 10% per annum to be paid on outstanding balance

Step 2: Interest and Payment Schedule

31^st March, 2023:

Interest = 10% of ₹4,00,000 = ₹40,000

Total due = ₹4,00,000 + ₹40,000 = ₹4,40,000

Payment made = ₹2,00,000 (1st instalment)

Balance carried forward = ₹2,40,000

31^st March, 2024:

Interest = 10% of ₹2,40,000 = ₹24,000

Total due = ₹2,40,000 + ₹24,000 = ₹2,64,000

Payment made = ₹2,00,000 (2nd instalment)

Balance carried forward = ₹64,000

31^st March, 2025:

Interest = 10% of ₹64,000 = ₹6,400

Final Payment = ₹64,000 + ₹6,400 = ₹70,400

Iqbal's Executor Account

Date	Particulars	Amount (₹)	Date	Particulars	Amount (₹)
2022 Apr 1	To Balance b/d	4,00,000	2023 Mar 31	By Bank A/c (1st instalment)	2,00,000
2023 Mar 31	To Interest A/c	40,000	2023 Mar 31	By Balance c/d	2,40,000
2023 Apr 1	To Balance b/d	2,40,000	2024 Mar 31	By Bank A/c (2nd instalment)	2,00,000
2024 Mar 31	To Interest A/c	24,000	2024 Mar 31	By Balance c/d	64,000
2024 Apr 1	To Balance b/d	64,000	2025 Mar 31	By Bank A/c (final payment)	70,400
2025 Mar 31	To Interest A/c	6,400
Total		7,74,400	Total		7,74,400

 

Final Answer: Iqbal's executor received a total of ₹7,74,400 including ₹74,400 as interest over 3 years.