Partnership

Important notes and formula

What is a partnership?

When two or more persons are doing business jointly then it is called a partnership.

Who are partners?

Persons involved in a partnership are called the partners.

Example

Thakur along with Jai and Veeru started a restaurant business in Ramgarh. So, this is an example of Partnership and the three persons involved are the partners.

Active or Working Partner

If a partner is actively involved in the business then he is called an Active or Working Partner.

Inactive or Sleeping Partner

If a partner is not involved in the business but only invests in the business then he is called an Inavtive or Sleeping Partner.

Investment and share of Profit/Loss

Investment for the same time period by all partners

When all the partners invest money for the same time period then the profit or loss is distributed among the parterns in the ratio of their investment.

If person A and person B invested X and Y amount respectively in a business for a year then ratio of the profit is
(A's share of profit) : (B's share profit) = X : Y

Investment for different time periods by the partners

When partners make investments in a business for different time period then the share of profit and loss is calculated based on the amount of their investment and the duration of their investment.

If person A invests X amount for M months and person B invests Y amount for N months then the ratio of the profit is
(A's share of profit) : (B's share profit) = XM : YN