Partnership

What is Partnership?

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

Ratio of division of gains/loss

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 number of 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,

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

Working Partner and Sleeping Partner

A partner who manages the business is known as the Working Partner and the person who simply invests the money is known as the Sleeping Partner.