1. Partnership :
When two or more people joins hands with a common goal to attain profits or run a business jointly, they are called Partners and the deal is known as Partnership . Every partner invests either time, money or his patents to help partnership firm to reap profits.
2. Ratio of Division 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.
(ii) When investments are for different time periods, then equivalent capitals are calculated for a unit of time by taking (capital × 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.
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 .
Quicker Method to solve the Question
If the period of investment is the same for each partner, then the profit or loss is divided in the ratio of their investment.
If A and B are partners in a business, then
Investment of A / Investment of B = Profit of A / Profit of B
Investment of A / Investment of B = Loss of A / Loss of B
If A,B and C are partners in a business, then
Investment of A : Investment of B : Investment of C = Profit of A : Profit of B : Profit of C
Investment of A : Investment of B : Investment of C = Loss of A : Loss of B : Loss of C