PARTNERSHIP

When 2 or more than two persons run a business jointly, they are called partners; and the deal is known as partnership.

Ratio of division of Gains:

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.

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.

2. 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) = X*P : Y*Q.

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.