Partnership: Formulas and Shortcuts to calculate Profit Sharing
Partnership is an important concept of Quantitative Aptitude Section as questions from this topic is frequently asked in the competitive exams. The concept of “Ratio and Proportion” plays an important role in solving questions based on this topic.
When two or more than two persons run a business jointly, they are called partners in that business and the deal between them is known as partnership.
There are two types of partners in the business:
- Working Partner: A person who manages the business is known as working partner.
- Sleeping Partner: A person who simply invests the money is known as sleeping partner.
- Suppose two persons P and Q invests Rs. X and Rs. Y respectively for a year in a business, then their share of profit or loss at the end of the year:
- Suppose two persons P and Q invests Rs. X for m month and Rs. Y for n months respectively, then
- When investments are altered in the given period we need to take the changes into consideration while calculating their profits.
Suppose, A and B started their business with Rs.5000 and Rs.10000 respectively.
If after three months A invested another Rs.5000 then we have to consider A's capital for the remaining period is Rs.10000.
Here is an example to understand the basic concept and formulas of Partnership:
Example: A started a business investing Rs. 50,000 in 2015. In 2016, he invested an additional amount of Rs. 20,000 and B joined him with an amount of Rs. 70,000. In 2017, B invested another additional amount of Rs. 20,000 and C joined them with an amount of Rs. 70,000. What will be A’s share in the profit of Rs. 210000 earned at the end of 3 years from the start of the business in 2015?
Answer: Calculating the ratio of A, B and C:
So basically questions based on partnership mainly focus on two factors which are:
• Profit shares of Partners and
• Time Period of their respective Investments.