Partnership

Partnership: An association of two or more persons who invest their money together in order to carry on a certain business is known as partnership and after a certain period of time , they share the profit or loss of the business in the ratio of their investment Persons who have entered into partnership with one another are individually called partners and collectively called a firm and the name under which their business is carried on is called the firm name .
Partnership can be classified in two types:
1 . Simple Partnership
2 . Compound Partnership

Simple Partnership :
If all the partners invest their capital for the same time period, such partnership is know as the simple partnership. In this partnership , the profit or loss of the business is distributed among the investors in the ratio of their capitals.

Important Points to be remembered:
1. 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.
2. When investments are for different time, 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.

Example :
If the capital C1 invested for the time period T1 ,and the capital C2 is invested for the time period T 2 and capital C 3 is invested for the time period T 3 , then ratio of the profits = C 1 T 1 : C 2 T 2 : C 3 T 3
3. If the capital C 1 is invested for the time period T 1 and capital C 2 is invested for the time period T 2 , then P1/P2 = C1T1/C2T2 A. B = 12000: 15000
= 3: 4

When all investor invested their money for the different durations then calculation of investment will be as follows: (investment x number of unit time)
If Agniwesh invest 12000 Rs . for 5 month and Vikrant invested 15000 rs. for 8 month. Then the profit/loss will be divided in the following ratio : A. B = 12000x5 : 15000x8
= 60000: 12000. = 1 : 2

Example :
Let three partners A,B and C invested Rs 12000, Rs 15000 and Rs 18000 respectively in a business.In the end of the year , the profit will be distributed among them in the ratio of their invested money
i.e, 12000 : 15000: 18000 or 4:5:6

Compound Partnership:
If the capitals of the partners are invested for different time periods ,the partnership is known as compound partnership . In this type of partnership, profit or loss of the business is distributed in the ratio of product of their investments and time for which capital is invested

Example:
A started a business by investing Rs 40000.After 3 months B became partner by investing Rs Rs 30000. In the end of the year ,the profit is distributed between A and B in the ratio of 1G
product of time and their invested money
i.e, 40000 x 12 : 30000 x 9 or 16: 9