Partnership Concepts

Understanding the Concepts of Partnership

Partnership is a derived concept of Ratio and Proportion.

In one form of partnership, all participants shared equal benefits and liabilities, however in another type of partnership, the partners might well have fixed responsibilities.

Listed below are the different Partnership concepts:

1. Simple Partnership
2. Compound Partnership

1. Simple Partnership

All resources are contributed for the exact same period by all investors in this sort of partnership. It might be capital or other assets. Furthermore, profit is distributed in accordance with the availability of resources.

The following is a partnership formula:

When all of the partners' investments are for the same amount of time, the profit or loss is split among the partners in proportion to their investments.

For Example

If A and B each invest Rs. x and Rs. y in a company for a year, at the end of the year:

(A's profit share): (B's profit share) = x: y

2. Compound Partnership

As the title indicates, the money in such a partnership is contributed at different times by many investors. Furthermore, the benefit-sharing ratio is validated by duplicating the capital provided with the unit of time.

When investments are for different time periods, comparable capitals for a unit of time are determined by taking (capital x number of units of time).

The profit or loss is now split by the capitals' ratio .

For Example

If A invests Rs. x for p months and B invests Rs. y for Q months, the result is

(A's profit share): (B's profit share)= xp: yQ