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Partnership - Facts and Formula

  1. Partnership: When two or more than two persons run a business jointly, they are called partners and the deal is known as partnership.
  2. Ratio of Division of Gains:
    • When investments of all the partners are for the same time, the gain or loss is distributed a 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,


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

  3. 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.