Partnership

Partnership

When two or more than two persons run a business jointly,they are called partners and the deal is known as partnership.

Ratio of Divisions of Gains:
When investments of all the partners are for the same time, the gain or loss is distributed among the partners in the ratio of their investments.

Suppose A and B invest Rs. x and Rs. y respectively for a year in a business, then at the end of the year:(A's share of profit) : (B's share of profit) =x:y

When investments are for different time periods, then equivalent capitals are calculated for a unit of time by taking (capital x numberof units of time). Now gain or loss is divided in the ratio of these capitals

Suppose A invests Rs. x for p months and B invests Rs. y for q months then,

(As share of profit) : (B's share of profit)= xp : yq.

Working and Sleeping Partners:
A partner who manages the business is known as a working partner and the one who simply invests the money is a sleeping partner.

Two types of partnership

• Simple Partnership
In simple partnership, capitals of
partners are invested for the same period of time.

Basic Formulas
( Capital of A / Capital of B ) = (Profit of A/ Profit of B )

Example sum
A, B and C started a business by investing Rs. 120000, Rs. 135000 and Rs. 150000 respectively. Find the share of each, out of
an annual profit of Rs. 56700?
Ratio of shares of A, B and C = Ratio of their investments.
= 120000 : 135000 : 150000

= 8: 9: 10
Total ratio = 27
A's share = Rs. [ 56700* (8/27)]
= Rs. (2100*8)
= Rs. 16800
B's share = Rs. [ 56700* (9/ 27)]
= Rs. (2100*9)
= Rs. 18900
C’s share = Rs. [ 56700* (10/ 27)]
= Rs. (2100*10)
= Rs. 21000

     ·  Compound Partnership
In compound partnership, capitals of partners are invested for the different period of time.

    Basic Formulas
( Capital of A * Time period of A) / (Capital of B * Time Period of B ) = ( Profit of A / Profit of B )

     Example sum
In a business, Lucky invests Rs. 35,000 for 8 months and manju invests Rs 42,000 for 10 months. Out of a profit of Rs.
31,570. Find manju’s share?
Lucky : Manju = ( 35000*8 : (42000*10)
= 280000 : 420000

= 2 : 3
Total ratio = 5

Manju’s Share= Rs.[(3/5)*31570]
= Rs. (3*6314)
= Rs. 18942

Ratio of Divisions
When investments of all the partners are for the same time, the gain or loss is distributed among the partners in the ratio
of their investments.

Example sum
Ramya starts a business with Rs. 45000. Janani joins in the business after 3 months with Rs. 30000. What will be the ratio in which they should share the profit at the end of the year?
Ramya and Janani share profit = Ratio of the investments multiplied by the time period
= (45000 * 12): (30000*9)
= 540000 : 270000
= 54 : 27

= 2 : 1