Partnership

Partnership

An association of two or more persons, who put their money together in order to carry on a certain business is known as partnership. After a certain time period, they distribute the profit or loss of the business in the ratio of their investments. The persons who put their money in a business under the partnership are known as partners.

There are two types of partners

1. Active Partners A partner who manages the business is known as an active partner.

2. Sleeping Partners A partner who provides capital but does not involve directly in the business is known as a sleeping partner.

There are also two types of partnership

SIMPLE PARTNERSHIP

If the capitals of the partners are invested for the same time, the partnership is known as simple partnership.

In this type of partnership, the profit or loss of the business is distributed among the investors in the ratio of their invested money.              \[{{P}_{1}}:{{P}_{2}}={{l}_{1}}:{{l}_{2}}\]

COMPOUND PARTNERSHIP

If the capitals of the partners are invested for different span of time, 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 money is invested.         \[{{P}_{1}}:{{P}_{2}}={{l}_{1}}\times {{t}_{1}}:{{l}_{2}}\times {{t}_{2}}\]

Quicker One

Ø  If \[{{l}_{1}}:{{l}_{2}}:{{l}_{3}}\] is the ratio of investments and \[{{P}_{1}}:{{P}_{2}}:{{P}_{3}}\] is the ratio of the profits, then the ratio of time periods is \[\frac{{{P}_{1}}}{{{l}_{1}}}:\frac{{{P}_{2}}}{{{l}_{2}}}:\frac{{{P}_{3}}}{{{l}_{3}}}.\]

Ø  If the ratio of time periods of investment is \[{{t}_{1}}:{{t}_{2}}:{{t}_{3}}\] and the ratio of the profits \[{{P}_{1}}:{{P}_{2}}:{{P}_{3}},\] then the ratio of the investments is \[{{l}_{1}}:{{l}_{2}}:{{l}_{3}}=\frac{{{P}_{1}}}{{{t}_{1}}}:\frac{{{P}_{2}}}{{{t}_{2}}}:\frac{{{P}_{3}}}{{{t}_{3}}}.\]