More than one person agree to invest their money to run a business or firm then this kind of agreement is called partnership. The persons involved in the partnership are called partners.
Two types of partnership
- Simple Partnership
In simple partnership, capitals of partners are invested for the same period of time.
( 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.
( 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