Basic Concept Of Partnership

Partnership – Basic Concepts, Formulas & Short Tricks

Banking • SSC • Railway Exams | Quantitative Aptitude

1. What is Partnership?

Partnership is a business arrangement in which two or more people invest money in a business and share the profit or loss according to their investment and the time for which their money remains invested.

In competitive exams, partnership questions mainly involve calculating the profit-sharing ratio and the profit received by each partner.

Example: Basic Understanding

A invests ₹5,000 in a business, and B invests ₹10,000. Both invest for one year. If the total profit is ₹6,000, find their respective shares.

2. Important Formula of Partnership

The most important rule to remember is:

Short trick: Multiply each partner’s capital by the number of months invested. Simplify the resulting values to obtain the profit-sharing ratio.

3. Types of Partnership Questions

4. Short Tricks for Faster Calculation

Trick 1: Investment in the same ratio

If A and B invest in the ratio 3:5 for equal periods, their profit ratio is also 3:5.

Trick 2: Same investment

If both partners invest equal amounts, the partner who invests for twice as long receives twice the profit.

Trick 3: Find profit directly

If the profit ratio is 2:3 and total profit is ₹25,000:

Trick 4: A partner joins later

Subtract the joining date from the end of the business period to find the number of months invested by the new partner. Use the actual investment durations in the ratio.