An annuity is the series of equal payments occurring at equal periods of time. It may also be said as "Equal payment or uniform payment series". In certain business dealings, equal payments are made at the end of equal periods of time and all such accumulated payments are allowed to earn compound interest. Periods of time may be of any length say a year and a month etc, but periods should be of equal length. Interest is experienced yearly terms but the actual interest is paid at the end of each equal period. Hire purchase payments, installments buying etc. are done by this method.

These have the following common features:

(i) These involve series of payments.

(ii) All payments are of equal amount.

(iii) Payments occur at equal time intervals.

(iv) All payments are made at the end of period.

(v) Compound interest is earned on all accumulated payments.


Types of Annuities

1. Capital Recovery Annuity

2. Present Worth Annuity

3. Sinking Fund Annuity

4. Compound Annuity

Next Chapters

Single Entry Accounting
Depreciation Dividends in Accounting
Double Entry Accounting
Cash Book
Discount Assets
Ledger in Accounting
Final Accounts
Liability Debenture
Journal Entry
National Income
Trial Balance Payroll Accounting
Drawings in Accounting
Petty Cash Book
International Trade Admission of a Partner
Book Keeping
Bill of Exchange  

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