Welcome to Accounting Education

The Accounting University with 3400+ Accounting contents as study material which can watch, read and learn anyone, anywhere.

Start your studies


Journal Entries $type=three$count=6$author=hide$comment=hide$label=hide$date=hide$show=home$s=0

Balance Sheet $type=three$count=6$author=hide$comment=hide$label=hide$date=hide$show=home$s=0

Solution of Problems in Annuities of Organisational Finance


This is a humble request from you to find some useful tips on Annuity, Sir, I'm a student of Masters in Professional Accounting from Sydney University, Australia, I am facing problems in Annuity (both Future and Present).

I have been learning many things from your blog and I have also registered with ur email. So, Kindly email me regarding Annuities of Organisational Finance, one of the subjects of Masters.


Dear student,

For solving annuities problems of your organisational finance subject, you have to understand the meaning of annuity. After this, you can go deep in it.

Q:- 1.  What is Annuity?

Ans. : When you purchased an asset on credit, you have to pay the amount purchased asset in installments. That installment is called Annuity.

For Example

Suppose, you have to go to Sydney University, Australia from your house which is about 60 km. far from your own house where you are living. Now, you go to your local financial institute and finance your car. You can fix that you have to repay the amount of car with in 12 installments. These installments will be annuities.

More deep explanation of Annuity:

 Above was the simple definition and example of annuity but we can explain more deeply it. Above is only that type of annuity which is fixed for its future time . For example , if we purchase a car and if agreement fixes the 10 installment of payment , then these annuities will be called annuity certain. We also fix Perpetuity or perpetual annuity. It is that type of annuity which is payable all the time . There is no end of these annuities . For example , if a person has taken life insurance policy , then if he pays its premium up to his life , these these annuities will be called perpetuity or perpetual annuity.If  Any annuity whose payment is closed after some time , then these annuity is called forborne annuity .

I think you understand the meaning of Annuity and its different types. Now, I am taking second step for calculation of annuity. You have to understand the steps to calculate the annuity.

Q: 2 How to Calculate the Annuities?

Ans.  In organisational finance, we need to calculate different annuities different Techniques of Mathematics Finance.

First Technique of Calculating Annuity

If you have to buy any car , TV , or any other product , then this formula can used for calculating value of annuity . In many questions , you will see that buyer will pay some amount when he buys product , so deduct it from principle amount .

For example :

A man purchases a refrigerator by making a cash payment of Rs. 5000. In addition he has to pay Rs. 1000 at the end of each six month for 4 years. If money is worth 10% compounded semi-annually find cash- price for refrigerator.


This problem, we can only solve, if we know first technique to calculate the annuity.

Cash price of refrigerator - cash payment =

Value of Annuity X [ 1- (1+r/100) and its power minus t / r/100 ]


Cash price of refrigerator =

cash payment + Value of Annuity X [ 1- (1+r/100) and its power minus t / r/100 ]

cash price of refrigerator = 5000 + 1000{ 1- (1+5/100) power - 8 / 5/100 }

Cash price of refrigerator = Rs. 11466

Second Technique of Calculating Annuity

If you have created any fund to buy new fixed asset or repay the amount of long term loan or debentures,  then second formula is more simple than first

For example

A person sets up a sinking fund in order to collect RS. 50, 00, 000 after 19 years for his child education in Sydney University, Australia. How much amount should he set aside into an account paying 5% p.a. Compound half yearly.

Solution :

Total target of person to save = Rs. 50,00,000 in 10 years because he will send his child to Sydney university, Australia for higher education and I think Rs. 50,00,000 will be needed to go to Australia for study  in 2020.

rate = 5% p.a. or 5/2 % half yearly

time or t = 10 x 2 =20

Total saving =

Amount or annuity or installment for sinking fund { ( 1+r/100) power number of time - 1 / r/100}

50, 00, 000 =  Annuity  { ( 1+ 5/200) power 20 -1/ 5/100}

Amount of Annuity = 50,00,000 X 1000 / 4 X 675 = Rs. 185100.80

So, that person have save 185100.80 set aside every six month for his child education in Sydney university, Australia.


: 2
  1. n annuity is used to provide a regular monthly or annual income in exchange for a one off lump sum. There are two main types of UK annuity. A pension annuity and a purchased life annuity.
    Thanks For This ....its really helps

  2. I have read your article, I have a question for you. We talk about 2 types of Investments 1. ULIP and 2. Mutual Funds.

    When you talk about ULIP, The maintainance Charges ,Morality Charges , Allocation charges come close to 40% of annual PermiumEg.HDFC Pension Plans. Apart from that they charge every year for maintainace.

    When you talk about Mutual Funds One time entrance fee of 2.5%, no annual charges.

    My question is

    1. Is ULIP giving higher returns than Mutual Funds,since close to 30% of our investement goes for maintainace,morlaity,allocation,annual charges

    2. What is the difference between Investing in ULIP's with Insurance plans like LIC Jeevan Tarang,Jeevan anand etc.

In comment, you can give your feedback, reviews, ideas for improving content or ask question relating to written content.



access,2,account,86,accountant,95,Accounting,683,accounting definitions,99,accounting ebook,3,Accounting education,85,Accounting Education Ads Help,1,accounting procedure,2,accounting process outsourcing,2,Accounting Software,52,advance,3,advertising,6,africa,7,Amalgamation,6,amendments,16,Amortization,1,announcements,62,Annuity,2,assets,53,audit,47,auditing,41,Australia,2,B.Com.,22,balance sheet,87,bank,111,Bank reconciliation,12,banking,33,basic accounting,110,BBA,1,benefits,13,best,50,bill,12,black money,3,blog,12,bloggers,7,book keeping,4,bookkeeping,3,Branch Accounting - full tutorial,8,budget,35,Budget variance,13,business,65,businessman,9,CA,30,calculator,4,canada,3,capital,72,capital budgeting,27,career,21,cash,40,cash book,8,cash flow statement,11,Chiense,1,children,13,china,6,class,3,coaching,2,coins,2,college,6,commerce,10,commerce students,7,company,36,computer,9,computer accounting,1,conference,4,Contact vinod kumar,1,Control Your Spending,27,corporate accounting,69,cost,160,cost accounting,195,cost center,8,cost centre,1,CPA,2,credit,18,credit card,11,cs,10,currency,35,data,11,Debit and credit,17,debit cards,1,debt,62,debtor,21,degree,6,depletion,2,depreciation,38,Diwali Messages,12,documents,4,dollar,5,domain,3,Downloads,3,Dubai,1,e-accounting,17,earning,17,education,246,Education Loans,6,email,15,employee,4,EPF,2,ERP,7,euromoney,1,examination,7,excel,17,excise duty,6,expenses,65,facebook,7,factor of loan,1,fans,2,feature,32,fifo,5,FII,4,fiji,1,finacle,1,finance,823,Finance Journal Entries,6,Financial,134,financial accounting,147,Financial Statements,4,fire insurance,3,flickr,2,flow,4,forensic,4,forex,21,formula,8,france,1,fraud,6,free,2,fun,34,function,1,fund,48,GAAP,36,GDP,1,gdr,5,germany,1,gold,7,goodwill,4,goodwill accounting,3,google,34,google apps,3,google apps,1,google base,1,google buzz,1,google calendar,1,Google docs,38,google finance,3,google fusion tables,1,google talk,5,govt.,5,GST,33,guide,85,health,6,Hindi,2,Hindi Language,3,history,3,holding company,3,How to treat FBT in Tally 9,1,HRA,3,ICAI,11,ICAWI,3,ICICI Bank,1,IFRS,11,income,17,income statement,19,Income Tax,7,India,57,indian railway,1,Indonesia,1,inflation,4,inflation accounting,3,infographics,8,information,7,inspiration,176,insurance,14,insurance accounting,2,Intangible,3,interest,26,international,7,Internet,40,Introduction of Tally 9,1,inventory,41,investment,135,investment in Shares,6,invoice,3,IT,1,Japan,1,Job costing,4,journal entries,143,Journal Entries eBook Help,4,Kalculate,1,keyboard,3,kuwait,2,laptop,2,law,4,LBT,1,learning,36,lease,5,lecture,11,ledger,17,leducation,1,Leverage Analysis,7,liabilities,16,lifo,3,linkedin,1,loan,74,logical point,1,loss,5,loss of profit,1,M.Com.,5,m.phil,2,malaysia,3,management accounting,129,manual accounting,4,manufacturing account,1,market,11,marketing,3,mastercard,2,material,13,MBA,14,MCA,1,media,4,migration,2,mobile,9,money,61,ms word,3,ms. excel,14,multi currency in tally 9,1,Multicurrency Accounting,3,mutual fund,30,national security,1,new and sacrifice ratio,1,new york times,1,new zealand,1,news,1,NGO,5,nonprofit-accounting,6,North Georgia Mountains,1,Notification,1,NPV,17,NSE,1,odbc,2,office,10,oman,1,online application,2,online accounting,11,Online Accounting Course,5,otcei,1,pakistan,3,parents,3,Partnership,1,pay pal,3,pdf,4,Personal Finance,6,pie chart,1,pie chart of income,2,pnb,5,podcast,1,ppf,1,presentation,10,price,7,privacy policy,2,prof. vinod kumar,13,profit,24,profit and loss account,12,project management,11,provision,14,purchase,9,puzzles,2,quickbooks,2,Quote,22,quotes,42,quotes of svtuition,1,rating agency,2,ratio analysis,34,RBI,7,readers,13,real estate,13,rectification of errors,11,remote control,2,reports,10,reserves,8,responsibility accounting,4,retirement,2,revenue,3,Revenue reserves,2,review,7,risk,11,rupees,9,salary,5,sale,12,SAP,3,saudi arabia,1,saving,19,sbi,9,scholarship,2,school,1,SEBI,13,security,30,service tax,23,share,20,share trading,15,Shares,16,shri lanka,3,singapore,2,sms,6,social accounting,7,society,5,solution,219,South Africa,1,stock,24,stock exchange,22,structure,6,student,39,students,70,study,21,subsidiary company,2,svtuition,14,swiss bank,2,tally,100,tally 9,8,Tally 7.2,8,Tally 9,42,Tally.ERP 9,59,TallyPrime,1,tanzania,2,tax,94,Tax Accounting,30,TDS,15,teacher,62,teaching,112,technology,33,test,40,testimonial,15,testimonials,15,thailand,1,tips,60,trading,5,trading on equity,2,transaction,7,trend,12,trial balance,14,truthfulness,1,tuition,3,twitter,10,UAE,5,UGC - NET Commerce,13,UK,11,United Arab Emirates,1,university,9,usa,25,valuation,9,VAT,22,Video,36,Voucher and vouching,4,Wealth,8,wikipedia,25,working capital,29,youtube,14,
Accounting Education: Solution of Problems in Annuities of Organisational Finance
Solution of Problems in Annuities of Organisational Finance
Accounting Education
Loaded All Posts Not found any posts VIEW ALL Reply Cancel reply Delete By Home PAGES Contents View All RELATED CONTENTS FOR YOUR LEARNING Topic ARCHIVE SEARCH ALL POSTS Not found any post match with your request Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS PREMIUM CONTENT IS LOCKED STEP 1: Share to a social network STEP 2: Click the link on your social network Copy All Code Select All Code All codes were copied to your clipboard Can not copy the codes / texts, please press [CTRL]+[C] (or CMD+C with Mac) to copy