Here we will learn how to solve the problems based on the capital invested in partnership firms, these type of problems are sometimes asked in the competitive exams.
The partnership problems are of 2 types simple partnership and compound partnership.
Simple partnership: When the partners have invested capital for the same period
Compound partnership: When partners have invested capital for the different periods and the profit is divided in the proportion of the time and capital invested.
Lets look at some simple formulae to solve these kind of problems. Lets assume there are three partner; Ram (X) , Radha (Y) & Shyam (Z)
If M, N and O are investment amount by the respective Ram, Radha and Shyam then total investment from all partners is (M + N + O), the proportion of profit will be similar to amount invested. Hence
- Ram’s share = Profit x [Ram investment (M) /total investment (M + N + O) ]
- Radha’s Share = Profit x [ N / (M + N + O) ]
- Shyam’ Share = Profit x [ O/ (M + N + O) ]
Since the period of investment is same, this is simple partnership
If case Ram has invested for ‘a’ months, Radha for ‘b’ month and Shyam for ‘c’ months, the proportion for investment will change as follows
Ram’s Investment = M x a, Radha’s investment = N x b and Shyam’s investment = O x c
The formula for proportion will also change accordingly
- Rams’s Share = Profit x a [ M/ (M+N+O)]
- Radha’s Share= Profit x b [N / (M+N+O)]
- Shaym’s Share = Profit x c [O/ (M + N + O)]
Lets practice this through a quiz
Quiz on the Partnership Problems