The difference between the compound interest (compounded annually) and the simple interest on a certain sum of money at 12% per annum for 2 years is Rs. 72. What is the principal amount?

Using the direct formula for the difference between compound interest and simple interest for two years, we have Difference = P multiplied by the rate squared divided by 100 squared. Substituting the given values gives 72 = P multiplied by 12 squared divided by 100 squared. This simplifies to 72 = P multiplied by 144 divided by 10,000. Solving for P gives 72 times 10,000 divided by 144, resulting in a principal of Rs. 5,000.

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